Housing crisis authorities LoanSafe.org and YouWalkAway.com, through their new website AfterForeclosure.com have partnered to offer an exclusive view into the “boomerang” buyer demographic. With over 150,000 combined members and over 500,000 posts, they put out a member survey to put their finger on the pulse of the “boomerang” buyer.
Based on their most recent poll and housing data, AfterForeclosure.com is confident that these potential buyers are necessary for the health of the 2014 real estate market.
Why is the boomerang buyer essential to the housing recovery?
Changes in lending guidelines and population shifts make these buyers essential to the recovery of the housing market. According to CoreLogic’s latest report, 4.8 million foreclosures have been completed since September of 2008. This figure does not include short sales, bankruptcies, loan modifications, deeds in lieu of foreclosure and other mortgage-related disqualifying events. That number is estimated to be well over 10 million. Alienating this large and growing pool of potential buyers does not bode well for the market in an environment where natural housing advancement has been largely disrupted.
Where are the traditional buyers?
Homes are less affordable today than they were in 2005 and 2006. The amount of mortgages that were interest only, ARM loans and negative amortization made up 60% of the loans originated during the boom years. In other words, in 2006 using an interest only loan at 4.5%, a homebuyer could qualify for a $400,000 loan whereas today with a 30 year fixed loan they would only qualify for a $300,000 loan using the same income. Today’s traditional loan programs will limit home prices from skyrocketing.
College graduates are on the sidelines: Out of control education debt is crippling traditional first-time homebuyers as they graduate college an average of $25,000.00 in the red with limited employment options. These monthly student loan payments and the lack of entry level careers are significantly dampening their purchasing power.
Underwater Homeowners: According to the CoreLogic equity report for the 3rd quarter of 2013, approximately 6.4 million homeowners were still underwater on their mortgages and cannot sell without bringing a substantial cash payment to closing or selling short.
Retirees: Baby boomers are aging in elevated numbers (76 million will hit retirement age over the next ten years) and many will undoubtedly shift into retirement and assisted living facilities.
Cash Investors: Rising prices and decreased appreciation forecasts have led to the exodus of cash investors. Historical and trend-driven players are exiting the real estate game, leading the way for “boomerang” buyers to make a grand re-entrance and AfterForeclosure.com is positioned to help.
So why are the after foreclosure borrowers so necessary?
In addition to meeting traditional guidelines such as income, credit score and down payment requirements, “boomerang” buyers are aware of the responsibilities – and unexpected possibilities – of homeownership. Survey responses also suggest that their desire to purchase again stems from static aspirations, such as setting down roots and investing in their own future, versus fluctuating factors like low prices and interest rates. In the past, rapidly rising prices led many to believe that they’d get “priced out” of the housing market altogether, leading to hasty purchases that may not have happened under less duress. “Boomerang” buys are for the right reasons.
Also, they are investing more into the purchase of a new property than in the past: survey responses indicate that “boomerang” buyers aren’t just putting down the minimum required.
Over 50% of those polled stated that they plan to make a down payment of 10% or more as part of their next home purchase.
According to their exclusive poll, not only are 80% of those who lost their homes during the crisis interested in buying again, but they may be the most qualified under current circumstances.
Of those polled:
- 40% report that their income is higher than when they first purchased.
- 24% report that income is the same.
- 61% report that their other debt obligations are lower than when they first purchased.
- 29% report that their other debt obligations are significantly lower.
- 22% report that their other debt obligations are the same.
- 46% report the desire to purchase in a lower price range this time around.
- 29% report wishing to purchase within the same price range.
Almost in acknowledgement of the importance of opening doors to this pool of buyers, the Federal Housing Administration recently implemented the “Back to Work” program. This program allows the purchase of a new property as soon as twelve months following a foreclosure or short sale provided that the borrower can prove that their prior default was the result of a financial hardship. “Financial hardship” is strictly defined as an employer-driven loss of at least 20% in income for six months or more. Although the program is definitely a step in the right direction, it leaves those who were self-employed and those whose default was caused by a need for relocation, increased expenses or loss of rental income all out in the cold. However, the worst violation by far is the lack of awareness. Of those polled, 80% have never heard of the program. Jon Maddux, Co-founder of AfterForeclosure.com says: “There are literally millions of ex-homeowners who may be qualified to buy a home again, but are unaware of the help that is readily available to them through existing and new loan programs.” Clearly the word needs to spread.Tweet