The news is good that home sales have rebounded, however you must place the rebound in perspective. Home sales have caught up with 2008, and look to finish ahead of 2008 by years end. What happened in 2008? Home sales fell 13.5% to below 3500 following four years that exceeded 4000. Simply put, the market has equalled the slowest year in home sales since 2002.
What has sparked the increase in home sales during such precarious economic times? Record low interest rates, affordable prices, and the first time home buyer tax credit. Following the first five months of 2009 with home sales down over 10%, interest rates fell back to near historic lows, and first time home buyers became aware of the tax credit, resulting in four consecutive monthly sales increases.
Typically when demand increases, prices increase. The median sale price in September was up to $109,000, an $8,000 jump from September of 2008. Meanwhile the average sale price fell to nearly $121,000 from about $127,000 in 2008. Does this mean home prices are rising?
The majority of activity has taken place at prices below $200,000 due to the tax credit for first time buyers. Through October 10th sales of homes over $200,000 are down 5% while sales of homes under $200,000 are up less than 1% from 2008.
Upper bracket home sales above $400,000 are down 33% year to date to 46 closed from 69 in 2008. It's worse for home sales over $500,000 with 14 closed year to date compared to 34 in 2008, a whopping 58.8% decline.
Because the median sale price is up 4.76% to $110,000 from $105,000, does that mean prices are rising? In my opinion it depends upon the price range. The evidence provided by sales activity indicates the median sale price is up due to demand in the lower price ranges generated by the first time buyer tax credit, while the average sale price is down due to weak demand in the higher price ranges.
Has the value of your home increased? Depends upon the price range of the home you are attempting to sell. Depends upon whether you paid too much for your home, how long you have lived in your home, and if you over improved for the location.
If you purchased your home in the 1990's at a fair price, you will realize some good appreciation upon selling. No matter when you buy an over priced home, some day you'll have to sell an over priced home. If you invest too much on improvements you typically will not recover the investment, however you will usually sell faster.
The first time buyer tax credit is over on December 1st unless congress extends the program. How will demand be impacted once the credit is no longer available?
My concern is that the housing market may suffer a cash for clunkers style hangover. The main stream media was giddy when auto sales went through the roof in August, reporting retail sales were up for the first time in months as a result, and that the worst market for car sales in decades was over.
It wasn't. Car sales plummeted over 40% for GM and Chrysler in September because many moved up their time table for a car purchase. This simply didn't leave many buyers for September. If the housing market suffers a similar hangover when the tax credit expires, it will be a long winter for home sellers.
So what is in store for the Springfield Illinois housing market and national markets in the months to come and in 2010?
Before that can be addressed we need some answers to the following questions. Please read these questions carefully and if you know the answers, please forward them to me.
What will interest rates do? Go up, down, or hold steady? Will the value of the dollar continue to fall, stabilize, or increase? Will inflation remain low or spiral upward?
What are the consequences of record deficit spending, and unfunded liabilities? If Cap and Trade passes? If health care reform passes as proposed?
What about the jobs market? Will unemployment continue to increase, stabilize, or decline? Will there be jobs created in the Springfield area? Will the Stimulus plan begin to work or continue to fail to create jobs?
What about taxes? Will taxes increase, remain the same, or be cut? Local, state, and federal please. Will the first time home buyer tax credit be extended, and/or expanded?
What about the price of gas, food, utilities, insurance, and health care? Up, the same, or down? Will consumer's disposable income rise, fall, or remain steady?
What about consumer spending? The same, up, or down?
What about consumer confidence? The same, up, or down?
When you can provide the answers to these questions, then predictions for the housing market in 2010 can be formulated.
