A growing number of Americans who lost their homes to foreclosure or a short sale during the housing crisis are re-emerging in the housing market and buying a home again, USA Today reports.
“Boomerang buyers,” as they’re nicknamed, are coming back, and some economists contend they are a critical component to driving a big uptick in the housing market over the next few years.
“I think the next phase of the housing recovery will be partly driven by people in the primary age group” of 35 to 64 who have been hesitant to buy again after losing their home during the housing crisis, Kwame Donaldson, an economist with Moody’s Analytics, told USA Today.
Lately, first-time home buyers and millennials have been driving the bulk of sales. First-time home buyers comprised 33 percent of all existing-home sales in March, according to data from the National Association of REALTORS®.
From the fourth quarter of 2017 to the fourth quarter of 2018, the homeownership rate rose from 58.9 percent to 61.1 percent among 35- to 44-year-olds—the largest increase of any age group. For 45- to 54-year-olds, the homeownership rate also rose, increasing from 69.5 percent to 70.1 percent, according to U.S. Census Bureau figures.
Donaldson attributes most of the increase in the share of 35- to 44-year-olds to boomerang buyers, who may have first lost their home when they were ages 27 to 36 during the housing crisis.
The potential for boomerang buyers is massive. From 2006 to 2014, the U.S. saw 7.3 million foreclosures and 1.9 million short sales, according to data from CoreLogic. Following a foreclosure, prospective buyers must usually wait seven years to qualify for a mortgage guaranteed by Fannie Mae or Freddie Mac, although that wait can be trimmed to three years in some cases. Short sellers generally must wait three years to buy again.
Of the 2.8 million consumers who saw their foreclosure, short sale, or bankruptcy drop from their credit report between January 2016 and November 2018, about 11.5 percent have obtained a new mortgage, according to a study by Experian, a credit rating agency. Fifty-three percent of the remaining 2.5 million who have not bought yet now have prime or super-prime credit scores.
“That’s 1.3 million people who have really good credit,” Michelle Raneri, a vice president at Experian, told USA Today. “Maybe they don’t realize they would qualify now.”
The majority of Americans who lost their home to foreclosure years ago say they want to buy again, though time frames vary. In January, 6 percent of these former homeowners say they plan to buy a home this year; 39 percent intend to buy over the next three years; and 58 percent say they’ll buy within five years, according to a survey conducted by NerdWallet, a personal finance website. However, taking the first step may be the toughest: Nearly one-third of the former homeowners surveyed admit that they’re afraid to buy a home again.
Read the whole story at USA Today.