How Recession Concerns Are Impacting Buy-Sell Equations

GlobeSt.com caught up with Marc Shuster, partner at Berger Singerman with more than 15 years of experience in real estate law, to dig into the topic.

MIAMI—Remember the days when seller expectations were inflated well over what buyers would pay? It seems we’re approaching those days again even as concerns about a recession loom. GlobeSt.com caught up with Marc Shuster , partner at Berger Singerman with more than 15 years of experience in real estate law, to dig into the topic in part one of this exclusive interview. In part two of this series, he will discuss how homes perform compared to stocks and more. GlobeSt.com: What do buyers and sellers need to know to be smart about the housing market as we enter Summer 2016? Shuster: Buyers need to bring their checkbook with them if they are targeting a strong US location. The demand remains with low inventory for the chosen areas within the country. On the other hand, in less known or desirable areas—or even nascent ones— a smart buyer can find deals provided they have the longitudinal discipline to stay with the investment.  The fact is there are deals out there as a recession looms. Sellers in the desired areas are probably a bit in love with their properties—there still remains a bid-ask disconnect—but generally utilize low interest rates and low inventory to get the price they want. Sellers who are not in such areas will have to come back to down to earth and take the buyer deal that’s available because of recession concerns. Bottom line—the housing industry has become localized in a way that we haven’t seen before. Neighborhoods that are less than one mile apart have reportedly different death rate outcomes and buyers and sellers know that. GlobeSt.com: Should the home be viewed as an investment? Shuster: Generally speaking, not really. Rather, you need a place to live anyway and home ownership is a sort of forced savings mechanism because you have to pay down the mortgage over the life of the loan. That’s the good news. Plus, you get to the tax benefits of deducting the mortgage interest, and could be exempt from creditors depending on jurisdiction. However, when you net the yield in usual profits—annual growth historically on houses is quite tepid against typical carrying costs you come to find it isn’t a good investment, and shouldn’t be really seen as one.