An interesting thing happened in the housing market when interest rates fell below 6% for only the second time since the 1960's; sales declined. With most lenders offering 30 year loans at 5.7%, and 15 year loans at 5% you would expect prospective buyers to rush the market like parents after Hannah Montana tickets. You would be mistaken.
Home sales pending closing year to date through three business weeks were at the lowest level since 2001, down from 207 in 2007 to 126 in 2008, a 39% decline. Three weeks does not make a trend, however it can make you take notice.
The inventory of homes for sale continues at record levels for this time of year with home listings exceeding 1650, and new listings coming to market out pacing sales by more than two to one.
What could cause such a slow start in this stable central Illinois housing market? It could simply be a return to more seasonal market activity with home buyers waiting until spring. Perhaps it could be satisfied demand following strong sales during a time of flat job growth. It could be the media saturating the news with talk of recession, causing buyers to take a wait and see position.
The media darlings are up to it again. Following a successful campaign creating a negative psychology within the housing market, the media is after the whole banana this time; the economy. The main stream media has succeeded in providing enough scare that the president came out this week with a $148,000,000,000 economic stimulus proposal to keep the country from 'slipping into recession'.
The key point is the country is not in recession, however everyone believes there is a recession because of the media. Perception is reality. Could that be the cause for the slow start in home sales in one of the nations most stable housing markets, Springfield, Illinois?
Another reason for the slow down could well be the rising cost of energy, and food have caused a pull back in consumer spending. You cannot have a recession unless there are two consecutive quarters of negative growth; we haven't had one. The only way you would have negative growth would be a significant drop in consumer spending. We might be seeing that pullback in spending as families pay outrageous prices to drive to work, take the kids to school, buy groceries, and pay their utility bills.
In my opinion the day of reckoning is near due to a lack of a meaningful energy policy that would reduce our dependence upon foreign oil. The energy bill passed in 2007 to much fanfare, is your typical political 'look what I've done for you' meaningless legislation. It does nothing to reduce our dependency on foreign oil, unless you believe mileage standards years from now will have an impact. History shows previous mileage standards have had the opposite impact. The 2007 energy bill is a toothless tiger.
Until politicians quit bowing before the politically correct altar of environmentalists, we will never escape our dependence upon foreign oil. An example would be when the city of Springfield wanted to begin construction of a new power plant. Simply with the threat of a lawsuit from a 400 some member environmental group, a city of over 115,000 was held hostage until the city paid the ransom of increasing emission standards beyond those required by law, and agreed to buy wind power to supplement the city's electrical production. The cost to taxpayers to date is estimated at $1.6 million and counting. The same thing is occurring at the federal level.
In the 1990's Clinton vetoed legislation that permitted drilling in Alaska, that would be delivering over one million barrels of oil daily into our market today. Instead we pay dearly for foreign oil. The technology exits for the environmentally safe drilling of our oil reserves, on shore and off shore. Castro can do it, but we can't? To add insult to injury there hasn't been a refinery built for over three decades, leading us to import 13% of our gasoline. With domestic oil deposits in the rocky mountain states estimated to be greater than those of Saudi Arabia, this is economic insanity. How much sand does Saudi Arabia import from us?
The reason our economy is in danger of slipping into recession is our own fault for not electing candidates that support real energy independence. Don't complain when you fill up your gas tank, check out at the grocery, or wait months longer to sell your home, if you can sell at all. The rising cost of energy that is diminishing your income is your fault. Maybe the environmental political correctness of our society the past couple decades will prove to be more expensive than expected. To allow environmentalists to obstruct our progress, economy, and safety at a time when technology exists to safely capture our own energy resources is irresponsible. The reward, energy independence, is worth the risk, slight impact to our environment. That is the inconvenient truth.
Time will tell if the slow start in home sales, at a time of historically low interest rates, is a return to normal seasonal activity, or a trend home sellers will rue.
