Fritz Pfister

The past week the local housing market cooled down a bit with 72 home listings reported sold pending by member brokers of The Capital Area Association of Realtors MLS. Year to date the number of home listings going under contract are up by 1.7%, however the key is how many actually close. We reported here last week that the chief economist for the National Association of Realtors indicated the largest gap between sales pending to closings on record. Locally closed home sales are down year to date by 6.4%.

A month ago I predicted that the March through May sales period looked to hold the best promise for home sellers to get sold in 2009 due to various economic factors, and that jobs was the key to the number of sales. Good news was reported this week from the Greater Springfield Area Chamber of Commerce showing more people were employed locally to begin 2009 than in 2008. Hopefully that trend continues, as the nation and state experience a drop in the number employed.

Quoting from Market Watch published in the Illinois Realtors magazine: “For the Illinois economy, the next few months will be critical especially in the degree to which the state will be able to respond to funding initiatives associated with President Obama’s recovery package,” said Geoff Hewings, Director, U of I Regional Economic Applications Laboratory. “The political turmoil in Springfield has already cost the state and the longer it continues the greater the danger for the state suffering a deeper recession than the U.S. as a whole.” End quote. Thanks Rod.

Quote; “the state’s gap between sales and listings is 13 months while the overall volume of activity is way down. We will see a little bit of up-tick as spring is a good time of year when that happens, unfortunatly the rest of the year is still trending downwards but nowhere near the rates we saw last year.” End quote. It appears that Dr. Hewings and I share the same outlook for the housing market.

Great news this week from Governor Quinn announcing that IDOT’s Department of Traffic Safety will stay in Springfield. Nervous news this week from Governor Quinn as he announced he will be proposing fee hikes and an increase in the income tax. There certainly will be a healthy debate in the capitol regarding a resolution to the financial quagmire left by the Blagojevich administration. Neither fee increases or tax increases will be helpful to a housing recovery as families have less to spend on goods and services. Expect a further pull back in spending until the uncertainty of these increases is laid to rest.

I have announced here for weeks to families that want to sell their homes the next couple of months will be critical to that success. For home buyers that want to buy this year the next couple of months will also be critical. As shared with you last week interest rates are at 50 year lows but are in jeopardy of rising rapidly due to cramming legislation under consideration in congress.

Regardless the outcome of the cramming legislation these interest rates may be the lowest you will be able to obtain for decades according to 49 blue chip economists that disagree with the stimulus plan, bail outs, and TARP spending by the federal government. Few of them believe the plan will be effective while most believe these actions will result in inflation, and potentially hyper inflation. Once interest rates begin to rise, the trillions of dollars the government is borrowing will have interest payments rise exponentially, leaving two to three generations of Americans to pay off the debt the federal government is incurring today.

Simply stated, when interest rates begin their climb, they’re probably not coming down for a decade. Home buyers and home sellers your window of opportunity is at hand. How long the window will be open is any one’s guess, however my intuition tells me to start getting concerned by July. The longer interest rates stay down, the better, and the longer your window of opportunity.

The reality of the economy is simple. When interest rates climb combined with the coming tax increases from all levels of government, the potential of rising gas prices as the middle east slows production to bolster the price of oil, increased costs to heat and cool your home is passed on to you if cap and trade legislation passes, with food costs to follow, along with rising unemployment; the housing market will suffer.

Please believe me folks, the next several months may be the best window of opportunity to buy or sell a home with these favorable of interest rates for a long, long time to come.

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