Fritz Pfister

Good news ladies and gentlemen will be reported in several weeks from The Capital Area Association of Realtors. October home sales were up 17.58% to 341 for the fifth consecutive monthly gain. The median sale price of $109,000 was down slightly from $109,900.

Through the first ten months closed home sales edged slightly ahead of 2008 by 25 or by .81% to 3111. The median sale price was up by 3.8% to $109,000. Record low interest rates and the first time buyer tax credit are the reasons for a reversal from the first five months of the year which saw closed home sales fall over 10%.

The federal government not only granted a reprieve for first time home buyers by extending the up to $8,000 tax credit until April 30, they expanded the program to families that have lived in their homes five consecutive years of the preceding eight years a $6,500 tax credit if they purchase a home.

All year I have encouraged everyone who wanted to buy or sell a home to do it now because this window of opportunity will be limited. The National Association of Realtors reports that of the 1.4 million first time home buyers that qualified for the program, they estimate 350,000 of those buyers would not have purchased their home without the credit.

For every action there is a reaction. Also reported here is that when the tax credits end the housing market will suffer from a cash for clunkers style hangover. In other words, just as in the car industry the housing industry is experiencing a false market with future demand diminished as a result of buyers who would have bought at a later date doing so now.

Don’t get me wrong this new expanded program will stoke the fires of demand over the next six months, which now becomes your new window of opportunity to buy or sell a home. There will be a price paid following the conclusion of the April 30th deadline. Home sellers that have planned on selling in 2010 must move up their schedule to take advantage of this window of opportunity. Demand will fall below normal levels after April, however the saving grace is that is a time of year we typically see more activity.

The new tax credit program will provide short term gain, however long term pain. The two wild cards for the market will be interest rates and jobs. Just as the tax credit has created a false market the same is true for interest rates.

The Federal Reserve launched a program during the financial crisis to purchase $1.3 trillion in bonds below market rates to keep interest rates on consumer loans low. Over $1 trillion has already been spent. The Fed as a result have created a false market, and when their program runs out of money and we return to market driven rates, mortgage rates will go up.

The jobs front looks bleak. Here is what The Heritage Foundation reported in their Enterprise and Free Market publication:

The Bureau of Labor Statistics released its monthly jobs report and the numbers speak for themselves. The economy shed another 190,000 jobs in October, bringing the number of jobs lost since Obama was sworn in to 3.8 million. Worse still, the unemployment rate rose from 9.8% to 10.2%. With only 130.8 million jobs in the U.S. economy, President Obama is now 7.8 million jobs short of what he promised the American people. That makes President Obama’s stimulus an objective failure.

The Obama stimulus failed because it was based on faulty Keynesian beliefs. Heritage fellow J.D. Foster explains: The Keynesian stimulus theory fails for the simple reason that it is only half a theory. It correctly describes how deficit spending can raise the level of demand in part of the economy, and ignores how government borrowing to finance deficit spending automatically reduces demand elsewhere.

Fortunately, the economy’s natural recuperative powers may be ending the recession. Last week the Commerce Department reported the economy grew at 3.5%. But if this recovery is going to include job growth along with GDP growth, then job killing initiatives like Obamacare and cap and trade will have to be abandoned. End Heritage report.

Then reported in today’s SJR the rise in unemployment was greater than expected, and the fall in consumer confidence was greater than forecasted. Economists have now raised their predictions that unemployment will rise to 11% by mid 2010, the highest since WWII. When counting those who have given up looking for a job, those who have exhausted benefits, and those working part time seeking full time work, the unemployment rate is 17.5%. Further evidence that Obama economic policies are failing.

Therefore the worrisome issues that will impact the housing market in 2010 following the expiration of the tax credit program on April 30, will be interest rates, jobs, and weaker demand. The greatest of these concerns in my opinion are jobs. It doesn’t matter how low interest rates are, or when demand is artificially raised; we will be left with fewer qualified buyers to purchase homes without job creation.

Ladies and gentlemen folks don’t typically move in large numbers over the winter. This year the smart ones will. Expect above normal activity this winter in response to the tax credit program, and expect below normal activity following the tax incentive expiration April 30, especially factoring in the forecast that unemployment will continue to rise through the middle of next year.

The SJR reports that small businesses continue to struggle. The Obama plan to make more money available through the SBA for small businesses will have little impact because most small businesses are eliminating debt as they prepare for the Bush tax cuts to expire which will raise their taxes, out of fear for higher costs if cap and trade passes, and exceptionally higher costs with sur-taxes and penalties if Obamacare passes. 

Just the threat of higher taxes causes small businesses to take a wait and see approach. In addition to the threats of tax increases from the Obama administration, small businesses in Illinois are also threatened with higher taxes if either Quinn passes a 50% tax increase or if Hynes is elected and institutes a debilitating progressive tax. Either of these tax increases will cost Illinois an untold number of jobs escalating the states unemployment rate to record levels. This is bad news for job creation because small businesses account for 70% of all new jobs in a typical year.

There; you have been put on notice that the warden has granted a temporary stay. But it is only temporary. It is not worth the risk to see how high interest rates go up after the Fed stops buying bonds. It is not worth the risk to see how much future demand is lost during the tax program. It is not worth the risk to wait and see how high unemployment rises in 2010.

Today through April 30 the window of opportunity will be wide open for everyone that wants to buy or sell a home, compliments of the U.S. taxpayer. The challenge to sell a home after April 30 will increase dramatically. Now is the time to sell.

Make this a great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. of RE/MAX Professionals Springfield. We have helped over 30% more home sellers get sold this decade than anyone. If you want to take advantage of this historic opportunity to sell your home call us at 652-7653 or e-mail fritz@springfieldhome.com our listing inventory is about sold out, we have immediate openings for home listings. We are working with numerous pre-approved home buyers that are looking for the right home. Call us today at 652-7653.

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