Former Home Owners Back in the Market

Are boomerang homebuyers returning to the housing market? This nickname "boomerang homebuyers" has been given to people who lost a home to foreclosure, but are ready to buy again, now or in the near future. For the most part, boomerang buyers belong to either the Gen X or Baby Boomer generations.

According to real estate tracking sites, almost one million buyers may be eligible for extended credit again next year, with estimates of a possible three to seven million more boomerang buyers returning to the housing market over the next seven years. Most of these buyers have been required to undergo seven years of credit repair after a foreclosure, or four years after a short sale, in order for a lender to consider a new mortgage loan.

A strict definition of a “boomerang buyer” is someone that was 60-plus days delinquent on a mortgage loan, someone who lost a mortgage through foreclosure, short sale, or other closure, or someone who received a mortgage loan modification. To qualify for a home mortgage today, borrowers (boomerang or otherwise) must have a minimum credit score of 620-640 for an FHA loan; they must meet down payment requirements and usually have a debt-to-income ratio of under 36 percent. The FHA requires a down payment of at least 3.5 percent of the purchase price. The minimum down payment for a conventional loan – without mortgage insurance – is 20 percent.

Real estate professionals believe these buyers may be a force to reckon with, based on their numbers. If half a million boomerang buyers entered the market over the next five years, they would represent ten to fifteen percent of all home sales.

Some families in this group are actively looking to purchase a home from an economic viewpoint. They point to high rental prices as an incentive to buy, because with an adequate down payment, a mortgage payment can be cheaper than rent. In addition, getting back into the real estate market may be a way to accrue equity and build financial assets.

In areas where rental markets are overheating, some families looking for rental properties can’t find them – or if they do, they are being priced out of the market. Nationwide, rents are up about 3 percent in the past year, according to one real estate site. Researchers add that rents have risen at twice the rate of wages since the year 2000. On the other hand, some who might qualify for a mortgage today may be less inclined to take the leap. They may be leery about the strength of the housing and job markets, and are willing to pay rent in return for peace of mind.

Housing markets in specific cities are more likely to benefit from the influx of buyers than others. Buyers are looking for cities that were hit hard by the foreclosure crisis, with home prices and inventory that have rebounded but not skyrocketed. These destination cities will homes that are affordable for the average buyer, as well as access to an active job market.

Cities that are considered likely destinations for buyers include Las Vegas; the Phoenix-Scottsdale area of Arizona, the Miami-Fort Lauderdale are in Florida; the Detroit-Lavonia area of Michigan; the Chicago-Naperville area of Illinois and the Atlanta-Marietta area of Georgia.

Some experts believe that the influence of boomerang buyers nationwide will be most noticeable in 2018, when an estimated 1.3 million consumers will have credit reports that have deleted a foreclosure or short sale from their report.

Great Living in Colorado

Keller Williams Realty  DTC, 6300 S. Syracuse Way Suite 150, Centennial, CO 80111

Jim Holmes : 303-475-7249
Patrick Panzarino : 303-956-2949