subject: Home Sales Boom In Springfield, Illinois [print this page] The Capital Area Association of Realtors member brokers have reported 363 closed home sales in November of 2009. This represents a 78.81% increase over the 203 closed in November of 2008, and bested the previous record set in 2005, of 322 by 12.7%.
There's even better news for local home sellers, the inventory of homes for sale as of December 5 fell to 1505. The fewest since 2004. In my opinion the market has shifted from a buyer's market to a level market as a result. With the exception of homes priced at $300,000 and higher which remains in a buyer's market due to the current inventory for sale compared to the rate of sales.
The November record was driven by the potent combination of record low interest rates mixed with the original first time home buyers tax credit deadline of November 30. The rush to the market to beat the deadline, before an extension to April 30 was announced, took a toll upon future sales.
Home listings going under contract fell by 2.72% from last November to 214 from 220. That may not seem like much, however last November closed sales fell 35.7% from 2007 while we were in the grips of uncertainty following the financial meltdown. For sales pending to fall below a bad month is not encouraging for future sales.
Interest rates and the extended, expanded home buyer tax credits will drive demand until April 30, assuming rates remain low as predicted. The demand for homes will be determined by the number of jobs in the local economy. Unemployment in Springfield stood at 8.2% in October, the highest in decades.
The Bureau of Labor Statistics reported the national unemployment rate fell to 10% in November, however 98,000 people who quit looking for jobs were not counted, and the largest increase in any jobs area were through temporary services.
Nearly 16 million people have lost jobs since the beginning of the recession, and 4 million since the Stimulus plan was passed. The unemployment rate when counting those who have given up looking with the underemployed is 17.2% down from 17.5% in October. Although headed in the right direction, not a very solid foundation from which to build a recovery upon.
President Obama convened a jobs conference looking for ideas on how to create jobs. The national Chamber of Commerce, and the National Federation of Independent Business were not invited in spite of their representing over 140 million private sector jobs in the country.
Ninety percent of the conference attendees don't hold jobs in the private sector, and were from academia, unions, and government. Probably not the best group to address private sector job creation. To date their ideas have created primarily more government jobs.
The idea of government offering a tax credit to businesses for new hires was proposed. If government wants to see first hand the impact of tax breaks upon the economy they need look no further than the historically stable housing market in Springfield Illinois. The evidence is provided by the record number of home sales in November.
My question becomes why not lower corporate taxes, capital gains taxes, and income taxes instead of attempting to come up with some convoluted formula of tax credits for hiring someone? Wouldn't many of those people have been hired regardless the tax credit if in fact the economy has begun to grow? Isn't the goal to increase the rate of jobs growth in the private sector?
Cutting corporate taxes from 39%, the second highest in the industrialized world, would provide businesses the revenue to expand. Cutting capital gain taxes would encourage nervous investors to begin investing again providing additional revenues for business growth. Cutting the income tax, or simply extending the Bush tax cuts, would lead to increased consumer spending.
What if anything will come of the jobs conference remains to be seen. The same can be said for demand for homes in the Springfield area following this record month. How much demand has been satisfied? How many buyers remain in the market?
Going forward the key to the number of home sales will be predicated upon the number of buyers with jobs qualified to purchase. Tax credits, and low interest rates don't mean a thing if you don't have a job.
