Almost two years ago several homeowners filed lawsuits accusing eight major homebuilders of causing them serious financial injuries.  These injuries came to light when the housing market crashed and these normal, responsible homeowners saw their communities deteriorate around them.

They were traditional homebuyers who bought homes in new developments advertised as “stable” and “traditional”; they were owner-occupants in communities where homes were not supposed to be sold to investors.  But it turned out that the vision they bought into was just a glossy sales campaign:  in fact, the developers had filled the communities with unqualified buyers who stood no chance of weathering an economic downturn.

Taking action, our clients filed lawsuits alleging that the builder/developers deceived them about the nature and quality of the communities they were developing and of the homes they were building, marketing, and selling. Our clients overpaid for what they really got.  And now that the curtain has been drawn back on the housing crisis, it’s clear that their homes and communities are less desirable to live in and suffered home value declines exacerbated by the true nature of these communities. Developments flooded with high-risk borrowers have yielded a landscape of foreclosures, short sales, and blight.

But there was one problem: the homebuilders argued that because our clients hadn’t sold their homes, they hadn’t actually suffered an injury. Legally speaking, they argued that the plaintiffs didn’t have “standing” to bring a lawsuit – they assert that responsible people who have stayed in their homes haven’t actually lost anything in this crash.

Last week one of the most influential courts in America disagreed, allowing the homeowners’ suit to continue and, in the process, issuing one of the most recent appellate-level pronouncements on the Constitutional doctrine of standing.

As reported by Reuters:

Against what the court called “the backdrop of the national housing crisis,” the 9th U.S. Circuit Court of Appeals in San Francisco said last Wednesday a lower court erred in concluding the homeowners lacked standing to pursue their fraud claims.

You can read the full ruling here.

The Ninth Circuit’s opinion debunked once and for all the strained argument that homeowners somehow could not claim they were harmed merely because they had not yet “realized” a loss through sale of their homes at a loss. As Americans know all too well, declining real estate values have an immediate financial impact on people’s lives even without a sale.

Tracing Supreme Court precedent as well as decisions from the Ninth Circuit and other circuits, the court concluded definitively that “a present decrease in the economic value of one’s home is a cognizable and concrete injury-in-fact.”

The Ninth Circuit’s opinion also rejected the homebuilders’ argument that homeowners could not claim an injury based on being misled into paying more for their homes than the homes were worth.  No better was the argument that homeowners weren’t wronged because they had received the “benefit of their bargain” and that buyers merely paid prices in line with what the market supported.  The court noted that these homeowners allege that the market for homes in these communities was set not by competition or on the merits, but by the homebuilders’ misrepresentations about what it was they were selling.

This is an early victory for our clients and other homebuyers who, pursuing the American dream of home ownership, became victims of opportunistic players in the housing industry.  We look forward to returning to the trial court. We intend to prove the allegations made in these cases and hold those who profited from this wrongdoing accountable.

For more information on joining the lawsuit, click here.