Second Quarter, 2007
Now that the local real estate market is transitioning from a period of runaway prices to a period of price correction, here are some tried and true lessons to be learned:
Runaway markets are not sustainable.Over that past several years Bradenton and Sarasota dominated nearly every list of over heated housing markets. Now we are experiencing the inevitable fallout from out of control speculator-driven markets. Coupled with collateral effects on property taxes and the existing insurance crisis, our local markets are likely to be challenged for the next several years.
Runaway markets trigger buying sprees. Rising real estate prices resulted in speculators buying in a rush hoping to cash in on the craze. Some were so eager to jump in that they dealt with little known “investment companies” and never saw the properties they purchased ahead of time. A few lenders got into the act too, engaging in irresponsible lending on inflated properties.
Runaway markets yield opportunities for smart buyers. Last year’s red-hot markets are now in a holding pattern while buyers wait to see what happens next. Behind the scenes, astute real estate investors (including a few of our clients) are doing their research and preparing to act on opportunities to pick up deals on defaulted or troubled properties, converting the failures of others into their own successes.
Runaway markets may precipitate a mass sellout. One potential danger we face today is that fears of falling prices will turn yesterday’s buying frenzy into tomorrow’s selling frenzy. Some predict that sellers will have to reset prices to pre-boom levels in order to sell, while others believe the market will return and plan to hold tight, perhaps tapping into the rental market for now. Only time will tell, but hopefully, rationality will return to the market and prices will return to stable ground. Why do we feel it is important to highlight this issue? The answer is that we want you to know that you can call on us should you need legal services in connection with your personal real estate concerns. We don’t attempt to offer investment advice, but rather, we are committed to providing sound legal advice, protecting your legal interests, and making sure that you understand the transaction, including its risks.