During and after the big housing bust, thousands of homeowners across the country lost their homes. With the real estate and home building market starting to show some signs of life this spring, there is optimistic news that many of those affected by the bust are finally able to re-enter the market.
USA Today had this recent report about these so-called “boomerang buyers” which has some startling statistics:
Since 2007, more than 4.7 million homeowners are estimated to have lost homes to foreclosure or short sale. Seven in 10 will return to homeownership within eight years of their short sale or foreclosure.
Here are some exerpts from Julie Schmit’s story. You can read it in its entirety on lohud.com
Four years ago, Dave Peterson was in the worst financial crisis of his life. He was in foreclosure, had declared bankruptcy and was struggling to find a place to rent in Las Vegas because of his terrible credit.
But last year he and his wife, Gabby, bought a $280,000 home that’s bigger than the one they lost.
Peterson is a “boomerang buyer,” one of several million who’ll return to the market in the coming years, real estate experts say, bringing needed muscle to a housing market that seems to be finding its footing.
They are people who lost homes in foreclosures and short sales in the historic housing bust who are striving to be homeowners again. Their time out of the market may be shorter than many Americans might expect. People who go through foreclosure can rebuild credit records and qualify for home loans again in three to seven years if they manage their finances well. With home prices still low and interest rates near record lows, today’s boomerang buyers might even find their next mortgage more affordable than their last one.
Boomerang buyers are most prevalent in areas such as California and Arizona that were hardest hit by foreclosures, and their return is contributing to rebounds in those markets. Going forward, growing numbers of boomerang buyers could help offset the expected slackening in demand from investors as home prices rise, says Stan Humphries, economist for real estate website Zillow.
Most of these so-called boomerang buyers get loans from the Federal Housing Administration, which requires just 3.5 percent down payments versus 20 percent for many conventional loans.
FHA borrowers can also have less-stellar credit. In January, their average credit score stood at 717 versus 767 for conventional-loan borrowers, according to data from mortgage tracker Lender Processing Services.
If consumers repair credit, they generally face waits of two to seven years to become eligible for home loans after a foreclosure or short sale. A short sale occurs when lenders allow a home’s sale for less than what’s owed. The FHA wait is three years for either one.
Even after the financial wreckage of a short sale or foreclosure, boomerang buyers say they’re driven to own for the same reasons they bought before. They want their own place. They see it as a good investment.
The rent vs. own equation is also driving homeownership. Nationwide, buying a home is now 44 percent cheaper than renting in 100 leading metros, data from real estate website Trulia indicates.
Helping affordability: interest rates below 4 percent and home prices still 30 percent off their 2006 peaks. Rents, meanwhile, have risen 8.3 percent in the past 2.5 years, Zillow data show.
“A lot of these people are just doing the math,” says Sean Fergus, analyst for Burns Consulting.