Fritz Pfister

Many families in the summer enjoy visiting state fairs and amusement parks to ride roller coasters. Why, because it’s fun! When you are a home seller that must sell your home, and the market goes on a roller coaster, it isn’t so much fun.

Here is what the local real estate consumer’s roller coaster ride has been like in 2009. They begin their ride by going down the first two months, going up the third then falling rapidly the next two months  and are now heading up again in June.

There was a little disappointment following the deadline for reporting closed home sales by local Realtors when there wasn’t much of a change from preliminary reporting. Closed home sales were down May from May by over 20%. Unlike earlier months such as April when sales declined but prices went up, both the number of sales and prices fell in May.

To continue with the roller coaster the first two business weeks in June, both sales and prices are up. I fully anticipate closed sales will be up in June, however I am taking a wait and see approach on prices.

What could cause such a roller coaster ride? The two biggest players impacting the real estate market today are jobs and consumer confidence. Nationally unemployment is up to 9.4%, however we don’t know the local or state jobless rate yet. I’d bet on the state being above the national average, and Springfield below both.

If we are faring better on the jobs front, then one can surmise consumer confidence is the big player in the real estate market. People may be confident in their jobs, however not have much confidence in their finances, and with good reason, or should I say reasons.

First, in today’s business section of the SJR there’s the headline; Gas prices rise for 45th day. Interesting little snip it from the AAA auto club, the new national average price is $2.639 per gallon. What is the price of gas in Springfield? A lot higher than the national average! Do you think the consumer might be just a little bit concerned about fuel prices? Does this inspire consumer confidence?

The very next article with the headline; What will get stocks on the move again?, repeated a theme from numerous articles this week. Last sentence; the market’s enthusiasm about the economy has been checked recently by unease about inflation and rising interest rates. Does the threat of inflation coupled with rising interest rates inspire consumer confidence?

Then there’s the uncertainty regarding the state budget and the potential tax increases. The governor is on full attack using scare tactics to pass an income tax increase. If you are paying $3000 a year in state income taxes, and the state raises the income tax to 5%, viola you begin paying $5000 a year! That’s an additional $167 a month going to the state. Does that inspire consumer confidence?

Then there’s the proposed Federal initiatives for cap and trade, and universal health care to be added to the twelve trillion dollars already spent by the government in the name of fighting the recession with nobody knowing how and when that will be paid for, weighing upon consumer confidence.

Let’s take cap and trade, and just look at the financial costs to you and ignore whether or not you believe in climate change. Studies from various groups show that if cap and trade is passed the average household utility bill will increase by $3000 a year. Another $250 a month gone from your income. Does that inspire consumer confidence?

Universal health care? Setting aside the argument of whether it is necessary, and we certainly can’t argue the plan because not many details have been released, however Bloomberg reported yesterday there is a six hundred billion dollar tax increase included in the initial proposal. That’s another $2000 a year or another $167 gone from your monthly income. Does this inspire consumer confidence?

Between these three proposals; the state income tax increase, cap and trade, and universal health care; $584 a month will evaporate from your monthly income, not counting whatever increases in the price of gas you’ll have to pay for, or for food prices. Does this inspire consumer confidence? 

What will it take to get stocks on the move again? What will it take to get the economy on the move again? Certainty. Man’s greatest fear is fear of the unknown. As long as families are uncertain what their government is going to be confiscating from their earnings, and uncertain about when an economic recovery will begin, they are not going to be confident. When the consumer isn’t confident they play it safe, and watch every dollar until there’s certainty. Only then will consumer confidence rise.

Until the federal, state, and local governments can get their acts together, so the consumer knows how much will be left in the family budget, the local real estate consumer needs to keep their seatbelt on, the roller coaster won’t be stopping.

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