Boomerang buyers bounce into the market
Truth is stranger than fiction and never more so than in the real estate market. Just as the national real estate market continues on a slow but steady upward trend, guess which buyers are back on the scene?
The National Association of Realtors reported in October that the sale of previously occupied homes fell in September after hitting a two year high in August, partly because there were fewer homes available to buy. September’s sales figures were the second highest level of the year, down 1.7 percent from August, but up 11 percent from a year earlier. These statistics were somewhat expected since sales in August were so strong they were expected to dip slightly.
Homes listed for sale in September were 20 percent below last year’s level and down 3.3 percent from August. Available inventory of homes hasn’t been lower since 2005, creating problems for buyers and realtors who are fielding multiple offers and selling homes sometimes sooner than expected. Some buyers are losing out to investors or other buyers who don’t need financing and are paying with cash.
But investors and buyers who have been sitting on the sidelines aren’t the only buyers out there. Millions of families lost their homes to foreclosure when the housing crash hit. Most of them never thought they would get back into their own home in the foreseeable future or ever. Well now some of those families are back in the housing market and even have a name boomerang buyers.
Many of these boomerang buyers after having their home foreclosed have repaired their finances, acquired new jobs and are ready to start over again. Mortgage brokers and realtors can’t put a number on how many boomerang buyers are coming into the market but contend that the number is significant. Even buyers who were foreclosed on as recently as three years ago are becoming eligible for a new mortgage.
There are a variety of rules for when and how buyers who have gone through a foreclosure or short sale can become eligible for a new mortgage. However, it typically takes three years after a foreclosure or short sale for a buyer to qualify for a FHA backed loan, and in some cases, it takes only one year after a Chapter 13 bankruptcy. Fannie Mae and Freddie Mac require a wait period of as much as seven years after a foreclosure, but some short sale sellers can purchase again after as little as two years.
However, becoming eligible for a mortgage doesn’t mean someone actually actually get a mortgage. Lenders are still very careful qualifying buyers who must have a strong credit score and a good history of paying their current bills and rent on time. With rents rising, mortgage interest rates still at an all time low and the real estate market being perceived as hitting the bottom, everyone wants to get back into a home.
In the second quarter of the year, the national home ownership rate was 65.5 percent, which was down from 65.9 percent a year earlier and 69.2 percent in the second quarter of 2004. I’m glad for those who can get themselves back on their financial feet and into their own home again.
But are we forgiving financial obligations too easily? Are we just setting ourselves up for another fall? And what message are we sending to future generations of buyers?
Truth stranger than fiction. You just can’t make this stuff up.