Fritz Pfister

Wow, what a week, you could have knocked me over with a feather when reading that the University of Illinois Springfield has forecast a rebound in the local economy this spring based on components such as housing starts, and home sales as part of their analysis! What do they know that we don’t? I attempted to contact the university through their website, however you need a college degree and a password to e-mail them from the site, of which I have neither.

Don’t get me wrong, I hope they are right. But to say the rebound is based upon housing starts? Single family building permits in Springfield for 2008 were at their lowest level since 1982. The city of Springfield reported building permits for single family homes fell to 97 in 2008 from 179 in 2007. That’s only a decrease of 45.8%. The number of new homes listed with Realtors in the MLS stands at a nine month supply. Sales of new homes in the MLS fell 25% in 2008, following a drop of 20% in 2007. This indicates a rebound?

Building permits are a sure indicator of future activity, and supply is half of the equation to future performance of the market when compared with demand. Did anyone share with the University’s Economics department that home sales in the local market declined in every quarter, for the year, and by 16.5% in the final quarter of 2008, while the supply of homes for sale continues at record high levels? Does this indicate a rebound?

Once again, I hope the university is right, however did the university consider the unusual dynamic , especially for our market, of increased foreclosures? It was reported that foreclosures locally were up 15% in 2008. That’s significantly lower than the national average, however when factored in with falling demand, it is forcing home sellers to compete for fewer buyers, and with lenders liquidating properties. Foreclosures not only drive up the supply, but are driving down home prices.

These lenders happen to be the beneficiaries of billions of your tax dollars, then discount the price of foreclosed homes by tens of thousands of dollars to sell them fast. This will, and has driven down appraised values, as local lenders share with me that a significant number of people attempting to refinance their home mortgage are being denied due to their appraisal coming in lower than their previous appraisal. 

The one benefit that I can see that comes from this foreclosure dynamic will be home sellers that would like to sell, but who don’t have to sell, who may keep their homes off the market. This will help the record inventory from increasing at an even faster pace.

I too think there will be a rebound in activity in the housing market this spring, however that’s like saying the temperature will be warmer by spring. It happens every year. In my opinion the record low interest rates will spark increased activity, however that activity will be limited by the number of buyers in the market. Demand may be down again this year if the jobs forecast is accurate. Even the Chamber’s Q5 committee has changed gears from saying they want to create, and retain jobs, to just retaining jobs.

In my opinion it may be more challenging to get a home sold in 2009, than it was in 2008. Here are the reasons why; an increasing number of homes for sale due to foreclosures adding to the supply while depressing prices, demand weaker due to the job market, and the uncertainty of consumers, at a time of record low consumer confidence waiting to see if the Obama stimulus plan will work, or make things worse.

After all it was government intervention into the private mortgage market that started this economic mess. Who can blame consumers for being cautious when the remedy for the economic mess caused by government intervention, is more government intervention.

The best opportunity to get a home sold, and probably at the best price you’ll get this year, will be March through June. With supply outpacing demand, and the pull back in consumer spending it looks like spring fever, and interest rates will have to be the driving forces for home sales this spring.

Perhaps when formulating their forecast next year the University of Illinois Springfield should call this uneducated mope, who has been working for 22 years in this housing market, who watches the housing trends closer than a construction worker watches women walking by on a hot summer day.

Perhaps the U. of I. sees something I don’t. I hope they are right and this local economy rebounds this spring. I would rather be wrong and working in a growing economy, than be right and working in a slowing economy!

Make this a Great week from Fritz and Kristie Pfister and the Pfister Success Team of RE/MAX Professionals Springfield. It would be an honor to serve you. Reach us at 217-652-7653 or from this site.

The opinions expressed are solely those of Fritz Pfister, and not RE/MAX Professionals of Springfield or RE/MAX International.