subject: A New Record For Home Sales Possible In Springfield Illinois [print this page] Realtors in Springfield Illinois may be poised to set a new record number of home sales for November dependent upon end of month closings. The 307 closed home sales reported through the end of business on the 27th are only 15 from tying the record set in 2005. We shall see when Realtors report closings on November 30. I'd bet on a new record.
This is good news for local home sellers but doesn't tell the whole story. The number of homes for sale fell substantially this year. This led to fewer home sellers competing for buyers and resulted in significant declines in expired and withdrawn listings. The 1569 homes listed for sale today represent 279 fewer than on this date last year. This has caused home prices to remain stable and even rise slightly.
Prices remain extremely affordable in spite of the median sale price rising 3.8% this year to $109,000. The potent combination of the first time home buyer tax credit and near record low interest rates brought buyers back to the market in substantial numbers. There is little doubt more homes will be sold this year than in 2008.
I'm not saying the market is back, it's not. It's just a whole lot better than last year but not nearly as good as 2003 through 2007 when the market averaged about 4100 home sales annually. My guess is local Realtors will post around 3700 home sales through years end.
It becomes difficult to gauge what is real demand and what is artificial demand resulting from people who bought homes simply due to the tax credit. The first time home buyer tax credit has been extended to April 30, and expanded to include families who purchase a home who owned a home five consecutive years within the preceding eight years. With eligible buyers granted until June 30 to close following the April 30 contract deadline, we probably won't return to normal market demand until summer 2010.
The key to demand for homes, following expiration of home buyer tax credits, will be interest rates and jobs. It doesn't matter how low interest rates are if you don't have a job. How much demand is being prematurely satisfied as people move up their plans to buy due to tax credits? We're going to find out.
During the brief period between when people believed the tax credit would end on November 30, and the announcement of the extension, Realtors reported the number of sales pending fell by 7.8% compared to last November.
If you recall the market was slumping in November of 2008 following the financial meltdown. This means the number of home sales following expiration of the tax credit extension could fall, and fall dramatically if there is any significant rise in interest rates, or unemployment.
The area within the housing market I believe you must watch to mark a true rebound in the local economy is new home construction and sales. When builders are working they employ a lot of people and account for millions of dollars in product sales. This leads to more jobs, more income tax, and sales tax revenues to run cash strapped governments.
There were only 97 single family building permits issued by the city of Springfield in 2008. Through October 101 were issued. That sounds like a rebound, right? Not really. Thirty of the permits were issued to one company to replace homes destroyed in the 2006 tornado.
During the boom of 2003 through 2007 the city averaged 283 single family permits. This means this years rebound in new home construction, even including the 30 home special project, is down about 60% from the high.
When counting all building permits, with the exception of remodeling permits, the city of Springfield averaged 495 permits 2003 through 2007. There were 176 issued in 2008, and are on pace for about 170 in 2009, about 65% off from the high.
There has only been one multi-family permit issued in 2009, compared to 10 in 2008, and commercial permits are down to 26 from 37 in 2008. Collectively through October the dollar value of building permits is down $59 million in Springfield from 2008. That's a meaningful amount of lost product sales, tax revenues, and jobs.
The jump in home sales since June is due to tax credits and interest rates driving demand. The 64 million dollar question is will the expanded and extended tax credit continue to create an equal or greater amount of demand for homes? What happens if interest rates begin to rise? What happens if unemployment continues to rise? Springfield unemployment rose to 8.2% in October, the highest in decades.
Following Springfield's historically slowest home selling season from Thanksgiving through New Years, we're going to see how demand for homes stacks up in 2010. Because the window of opportunity is short in real estate time, only four months, January through April should be extremely active.
Any home seller that must sell their home before they can purchase another home to qualify for the $6,500 tax payer gift, better be planning now. It takes time to prepare a home for sale, hire an effective broker/agent, implement the marketing, receive an acceptable offer, and then find another home to have under contract by April 30.
The average number of days for the 50.3% of listings that have sold in 2009, is 108 days from listing to contract, add another 30 to 45 days to closing.
Get out your calender and start the countdown. Let me help you; 152 days until the tax credit expires. Today is November 29, 2010. Good luck.
by: Fritz Pfister
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