Fritz Pfister

The Capital Area Association of Realtors (CAAR) released the official numbers for June home sales this week. The association for the past two months have started reporting sales as compared to the previous month as well as year over year. In my opinion the comparison to the previous month is unnecessary, and can cause confusion among consumers. I’m sure the reason is due to the numbers sounding so good. June home sales, 99% of the time, are greater than May sales. I wonder if the association will continue reporting previous month comparisons as we enter the slower season when the numbers won’t sound so good. Year over year is a much more dependable method for analyzing market performance.

The real story in the housing market continues to be the falling number of homes for sale. Without question this is helping the median sale price to increase as buyers have fewer options. Demand continues to be supported by the $8000 tax credit for first time home buyers. There are only 128 days remaining for first time home buyers to take advantage of this government giveaway. Come December 1, game over. You must close your purchase by November 30 to qualify.

Details have not been released, however IHDA announced a forthcoming plan for first time buyers to be able to borrow against the tax credit for down payment and closing costs. This will certainly help many qualified buyers that don’t have the necessary cash savings to close a purchase. Up to this point these buyers have had to find a seller willing to assist buyers with their down payment or closing costs.

Another developing trend is the number of homes going under contract. Although June posted modest year over year gains in sales pending, the current number of homes under contract are up over 20% above last year at this time. My prediction is that July will finish up over last year although through the 24th closed sales were down slightly. We’ll have preliminary sales figures next week following what I expect to be a very big end of month closing week. Due to the number of homes under contract there’s a good chance August closed home sales will be up. If that happens it will mark three consecutive months of year over year increases. This indicates the market is stabilizing, and poised for a rebound.

Jobs and consumer confidence remian the most significant factors affecting the housing market. Springfield reported that unemployment was up to 6.9% in June, the second lowest in the state behind Bloomington, however up 2% over last year. With the governor’s announcement that 2600 state workers will be laid off, the unemployment rate may very well increase locally. By how much no one knows.

The stock market rallied this week on stronger than expected earnings reports from some major companies such as Caterpillar. Cat revised their earnings for the year upward because the stimulus plan, in China, is working. The Chinese are ordering up big Cats as their economy continues to grow. China doesn’t have any self imposed job killers proposed like cap and trade to depress growth, like we have in the U.S.

Hopefully the senate will defeat cap and trade, which is estimated to eliminate two million more jobs than green jobs created, and the U.S. can remain competitive in world markets. Nothing the federal government has done this year has helped the private sector to create jobs. To the contrary, legislation passed and proposed, suppresses job growth, and capital investment.

The stock market surge may very well be a dead cat bounce because all the companies that posted profits did so, not because they increased revenues, but because they lowered expenses with job cuts. It is hard to gauge whether this will boost consumer confidence.

All in all it was a good week for the local real estate market. Based upon falling inventory, the rising median sale price, and increasing numbers of homes going under contract, I would say there is light beginning to shine through the trees. We’re not out of the woods just yet, however we are getting closer. Job growth and consumer confidence will lead the way out, if we can keep the federal government from causing any more damage to the economy.

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