Fourth Quarter Outlook

The Capital Area Association of Realtors (CAAR) reports closed sales activity is on record pace, and could see a new record for closed home sales for an eighth consecutive year. For most consumers that's good news. For others it's not so good. Yes it's great that a record number of homes have sold, and no it's not great if your home has not yet sold and you know a record number of buyers have already purchased.

As CAAR begins the fourth quarter of '05 it will do so with the largest inventory of homes for sale on record, 1646 as of 9-28-05. That's a 17% increase over the preceding year. The result of the record inventory of homes for sale, listings that are not selling continue to increase. Expired listings, those that did not sell during their listing contract, are up 22% YTD, and withdrawn listings are up an incredible 33%. That's nearly 2000 home sellers that failed to sell in what will be the best year on record for getting sold, and we have an entire quarter ahead.

Most home sellers are impervious to the changing market, as are most agents, and will not succeed without this basic information. Many agents are going to be disappointed to discover that only 1 in 3 home listings will sell the final quarter of '05. Yes the final quarter will wrap up another record year for home sales, however thousands will have failed in their selling attempt in '05.

How can this be? Most consumers believe real estate agents are interchangeable, hiring one is the same as hiring any one of them. After all, they do the same job. Wrong. Consider this if you will be selling a home, 10% of the agents are involved in over 90% of the sales according to Howard Brinton founder of Star Power, and one of North America's leading industry educators.

Here is my forecast for the greater Springfield real estate markets fourth quarter. Another 1000 or more homes will be listed for sale adding to the over supply of 1646 homes currently for sale. Between 750 and 800 home listings will close, and about 120 will be sold pending as the year ends. Another 900+ home listings will expire or withdraw, and CAAR will begin 2006 with a record number of homes listed for sale.

Where is the real estate market headed?

To get a handle on where the real estate market is headed you should look to the past. Harry Truman said it best, "There's no such thing as the future, only history that hasn't happened yet.".

What started the housing boom? When did it start? What will sustain a housing boom?

In my opinion the housing boom began in earnest on September 11, 2001. That tragic day caused everyone to reevaluate what was important in life. God, family, country, and home. The desire to get back to the basic premise of our founding fathers to be free to own property no longer was taken forgranted. In other words the desire to own a home hit an all time high, regardless of interest rates. A conscious national introspection caused the housing boom.

With the economy in dire srtaights following 9-11, the federal reservse moved boldly to pump the economy up with interest rate reductions making the dream of owning a home affordable to the most people in our history. The result was found in nearly 4 consecutive record setting years of home sales. Interest rates at levels not seen since the 1960's for over 2 years was certainly the fuel for the homebuying engine.

What will sustain the boom? It won't be the federal reserve boards' anti-inflationary fight by raising rates 11 times since June '04. It won't be demand with record numbers of buyers already having purchased, and are now out of the market. It won't be skyrocketing building costs due to demand for building materials following Katrina. The only hope for a continued housing boom relies upon the economy to continue to create jobs, which will create more home buyers.

The recent call by Democrats to raise taxes, reimplement the estate tax, and to abandon making tax cuts permanent would result in the death of the housing boom. Higher taxes never created one job, ever. Except one for a government employee, and we all know how productive an investment that is following the response to Katrina.

Democrats are using this national tragedy as an excuse to raise taxes to pay for the rebuilding of the Gulf coast. Don't buy that argument for a second. Democrats want to make you believe that raising taxes will also lower the national debt. No it won't. Lower taxes allows money to be kept by business to create more jobs, which creates more consumers to purchase products, and to pay taxes. Tax revenue to pay down the national debt will come from growth not contraction, and tax increases have caused contraction every time implemented throughout history. Heed Harry Trumans words.

Why is inflation such a threat in today's' economy? Rising energy costs. Why are energy costs rising? Congress's Democrats are appeasing environmental special interest donors by blocking oil production at home, and opposing the construction of refineries (none built in 30 years). The cartoon Pogo had it right when stated; "I have met the enemy, and he is me.".

Don't count on a continued housing boom as interest rates rise, demand is not being supported, and our national interests are held captive by environmental interest groups with politicians in their pockets. Expect a return to normal market conditions, falling housing prices due to weakened demand, and lots of frustration from home sellers outnumbering buyers 2 or 3 to 1 in the upcoming months, and maybe years if the tax raising, more money to Washington D.C. to be wasted, than into family incomes to purchase homes, politicians get their way.

Real Estates' Last Hurrah

The real estate year is starting its last hurrah for 2005. In Lincoln's hometown the Capital Area Association of Realtors MLS reports the 5 year average for home sales closed in the 4th quarter is 731 homes. The record 4th quarter was 814 closed home sales in 2003.

This presents a challenge to all families that need to sell their home quickly, because there are 1491 homes listed for sale not counting those that will list between now and years end. The challenge is that this time of year in our market, only 1 in 3 homes listed will sell and close before years end. Another 1 in 3 will sell but won't close until after the 1st of the year. The other third won't sell.

Through data reported as of September 9th the MLS began the year with 1203 home listings and has added 4231 listings for a total of 5434 listings in just over 8 months. How many sold and closed? 2673. Only 49%, and this during an all time record pace for home sales in the greater Springfield, IL. Area!

Who will be the winners and who will be the losers in the race to sell? The winners will be those that are perceived to have the best price for location, condition, and amenities. The losers will be perceived to be overpriced, and in subpar condition.

The bottom line is if you need to sell in 2005, and have been on the market 60 days or longer, you should adjust your asking price down by 10%. Why? The estimated cost to carry a home for 6 months is about 10% of one's asking price when you calculate property taxes, insurance, utilities, and mortgage payments. It is better to take the reduction now than wait 6 months until the spring market heats up and your home listing is stale with both agents and buyers.

If you are not yet listed with a broker and need to sell this year, you'd better hire the best agent and company you can find. Interview at least 2 or 3 agents from different companies and verify their claims, ask them to provide examples of marketing materials, and a Market Activity report from the MLS to see how they are performing in the market.

For your consideration as reported to CAAR MLS 1-1-05 through 9-9-05, RE/MAX Professionals had closed 1646 residential transactions exceeding $215 million in closed sales volume. The 2nd place company in transactions had 635, a whopping 1011 fewer than RE/MAX! The 2nd place company in closed residential dollar volume had a respectable $93.2 million, yet $121.8 million less than RE/MAX. This no fluke, RE/MAX Professionals has led this market for 16 consecutive years. The bottom line is when you need to sell in the greater Springfield area, those that hitch their wagon to RE/MAX have a 3 times better chance to succeed than with any other company.

If you know or have a relationship established with a RE/MAX Professional agent please call them. If you don't, my name is Fritz Pfister and it would be an honor to serve your family when buying or selling. My team and I have succeeded for over 100 families already this year in the sale or purchase of a home, becoming the only agent, or team of record in the MLS to do so 6 consecutive years. We would be happy to share our market leading services with you; phone 217-652-7653, www.SpringfieldHome.com, or fritz@springfieldhome.com.