In today’s challenging economy, it is more important than ever for someone buying or selling a house to properly structure the transaction. With so much downward pressure on prices in the depressed residential real estate market, buyers and sellers each need to protect their interests. At a minimum, this means negotiating for favorable terms and making sure that the transaction is structured properly.
At our firm, experienced real estate lawyers can help you through this.
How significant is the downward pressure on prices? According to recent data published in Forbes magazine, by the end of 2010, U.S. home prices were down 31 percent from their mid-decade highs. The usual suspects are to blame for this drop in home prices: bursting of the subprime mortgage bubble, and the vast numbers of foreclosures which have flooded the market.
The larger, lingering impact of the low prices, however, goes beyond the need for restoration of sound underwriting and credit practices by financial institutions and beyond dealing with the legacy of all those foreclosures.
The fact is that with so many jobs lost in the last few years, the pool of potential homebuyers has shrunk. With unemployment at 9 percent, fewer and fewer people can actually afford a home, even at the more affordable prices.
This new reality is reflected in the data. Since last summer, over two-thirds of the sales of existing homes were to cash buyers or investors. Only 6 percent were to first-time homebuyers. This compares to 41 percent of house sales to first-timers in 2009 and between 35 and 39 percent from 2005 to 2008, according to the National Association of Homebuilders.
The new normal is here, and we counsel our clients to plan accordingly.
Source: “How cheap houses spell bad news,” Fortune, 3-9-11