Conditions within the current housing market have enabled prospective buyers, from all walks of life, to participate in the recent buying frenzy. Of particular interest, however, is the projected influx of a certain population. Otherwise known as “boomerang buyers,” homeowners that have previously gone through a short sale, foreclosure, or bankruptcy are expected to once again test the market.
Previously distressed homeowners are expected to return to the market in some of the hardest hit areas, as to acquire a short sale or foreclosure deal of their own. Accordingly, boomerang buyers are predicted to account for nearly one in every five home sales in the metro Phoenix area this year. Those numbers represent a rate that is two times higher than the entire United States.
The projected boomerang buyer stimulation is directly correlated to the stability of our current housing market. Rents continue to rise while mortgage rates and home prices remain relatively low. Therefore, boomerang buyers are looking to capitalize on current conditions and seize the opportunity of ownership that has presented itself in certain geographical regions.
The following markets currently have the highest share of boomerang buyers and are expected to increase their ratios:
- Riverside/San Bernardino (4.1%)
- Los Angeles (3.7%)
- Phoenix (3.6%)
- Chicago (2.5%)
- Atlanta (2.5%)
- Las Vegas (2.12%)
- Washington, D.C. (2.1%)
While boomerang buyers are predicted to enter these particular markets, their ability to acquire a property will depend on the type of loan they had as a previous homeowner. Those who previously had FHA loans may need to wait three years if they are able to prove that a hardship, such as job loss or death of a wage earner, led to their foreclosure or short sale. By comparison, those that have not experienced a hardship are generally expected to wait a total of five to seven years.
Freddie Mac’s wait time is approximately four years following a short sale and seven years after a foreclosure. Fannie Mae, on the other hand, may require a seven-year wait for those who filed for foreclosure and just two for those who were forced into a short sale. These numbers, however, are expected to change, as mortgage giants have begun to change their lending rules. Owners who underwent a foreclosure or short sale may be able to qualify sooner because of the parameters set by new regulations.