What Is a Boomerang Buyer & What Impact will They Have on California Real Estate?

What Is a Boomerang Buyer & What Impact will They Have on California Real Estate?

Boomerang Buyers are previous home owners who lost their homes to foreclosure or short sale. As the Spring Real Estate Market heats up for 2015 the first wave of boomerang buyers are poised to re-enter the market. After 3 – 7 years of renting, their credit has been sufficiently repaired to make them prime candidates for home ownership. Moreover they have already had a taste of own vs. rent and many are eager to rejoin the ranks of home owners. RealtyTrac is predicting that in the next 8 years as many as 7.3 Million Boomerang Buyers will re-enter the Market. And the National Association of Realtors (NAR) puts California among the top 3 markets to see boomerang buyers ready to purchase over the next 10 years. Southern California alone has over 260,000 potential boomerang buyers. 

 

Let’s take a look at what it will take to get the boomerang buyers back into the market and the potential impact on home sales and prices.

First many foreclosed homeowners received some portion of the $3.6Billion settlement for homeowners that were wrongfully foreclosed on. This “windfall” could make them more likely to re-enter the market sooner than later, and they would do so armed with a down payment in hand.

Time is the biggest factor for reentry to home ownership. And that varies depending on foreclosure vs. short sale vs. how much down payment the boomerang buyer is returning to the market with. For a short sale the wait could be as little as 2-3 years and up to 7 years for a foreclosure.

At this time last year there were many second-chance mortgage options popping up throughout the country, especially in areas hardest hit by the housing downturn. Additionally some returning buyers (depending on their income and how long they have been out of the market) are able to qualify for first time home buyer programs. And Freddie Mac is offering a 3% down payment loan option as well as a 3% down payment assistance program. All of these programs, as well as the time that has passed are serving to make home ownership more accessible again, and this is great news for sellers!

According to (NAR) the first quarter of 2015 saw National homes sales up by 3.2% over the same period last year, while inventory was down by 0.5% for the same time frame. This has driven prices up by 6.2% nationally over the previous year. And in the Los Angeles market things are even more favorable with home prices up by 11% over last year in the 8^th fastest selling market nationwide.

Further Freddie Mac came out with a report this month stating that they have “Great Expectations for the Housing Market Outlook. The report states that “With spring upon us, housing markets are poised to accelerate and we expect the best year for home sales since 2007.” The report goes on to say that “Pending home sales were up 3.1 percent in February to the highest level since June 2013. This marked the fourth consecutive month for rising pending home sales showing positive momentum in general for the housing market.” Projections by Freddie Mac anticipate that by June home sales will be well above the pace of homes sales for any year since 2007! The caveat? A lack of inventory! Again, great news for sellers!

According the NAR California homes are selling within 30 – 45 days of being listed. This is a statistic that I am seeing hold true on the listings that I represent. There are so many advantages to a Seller’s Market chief among them being attractive sales prices as well as buyer’s concessions during escrow. If you’ve been considering selling, or waiting for just the right time, the time is Now! Call me today for a free market evaluation of your home.

Questions to Ask Before You Buy a Home

Questions to Ask Before You Buy a Home

What are your reasons for buying now?

Would it surprise you to learn that research shows that most home buyers don’t decide to purchase a home for financial reasons? In fact it’s other considerations such as a safe neighborhood, with good schools, or more space for your family and even to maintain control of your space via ownership. Think about what is bringing you into the market and determine if the reason is strong enough to move you forward to the next step.

Where are home values headed?

Is the market going up? Or has it been depressed? Does current inventory match the demand? Current projections are that Home values will appreciate by 4.4% in 2015 and by 19.3% in 2019. Even the most conservative estimates have the cumulative appreciation of home values at over 11.7% by 2019.

Where are mortgage rates headed?

Are rates dropping or on the rise? If the rates are currently low and projected to rise getting into the market while they are low could saves thousands of dollars over the term of the loan. The Mortgage Bankers Association, The National Association of Realtors, and Freddie Mac have all projected that mortgage rates will increase approximately 1% over the next 12 months.

How do your finances look? – Be Honest!

Is your income stable and steady? What about your debt? How is your credit history? Do you have sufficient savings for a down payment? All of these factors not only impact whether you would qualify for a loan, but also at what interest rate.

How much are you comfortable paying per month?

Your lender will give you a per-approval number at the beginning of the home buying process, but as attractive as that number may look, would you feel comfortable taking on it’s corresponding monthly escrow payment? A higher mortgage may require belt tightening in other areas such as vacations, buying the latest tech gadgets, or even going out to eat. Are these luxuries that you are willing to forgo for your dream home?

What are your absolute must haves in a home? As well as you wish list, and don’t wants?

While no home will give you 100% of what you want, what are your non-negotiables? Are you willing to put work into the home? Or would you rather pay more to have those must-haves? By the same token, are there features you absolutely do not want? Or things that would be the icing on the cake? Knowing these criteria will help me focus my search for you to find you a property that checks most, if not all, of the boxes.

What is this property worth in today’s market?

Now that you’ve decided it’s the right time to buy and you’ve begun looking, how do you know what the homes you are looking at are worth? For ethical reason I cannot tell you how much to offer, but I can show you comparative properties that have recently sold in the market to help guide you to a price you feel is fair. I can also tell you how long homes are staying on the market and the percentage of asking prices that the sellers are getting. This information will tell you how hot the market is. Lastly we’ll look at how long the home you’re interested in has been on the market, this will give us an indication of whether the market is slow or if the home is overpriced.

How flexible is the seller’s asking price?

I’ll start the negotiation process by feeling out the sellers agent, asking how firm the seller is on the price. This will help us to avoid offending the seller with a low ball offer. Additionally when asked in the right way, a seller may be willing to help out with closing costs. These are nuances that are handled by me during negotiations.

What’s wrong with the house?

This could be an important question and something you should keep in the forefront of your mind as you enter escrow. But even before you get to that point, sometimes asking point blank, or reminding the seller’s agent that you’ll likely find out during the disclosures and inspection process may get them to be more up front with the information. If you know there are repair issues that are deal breakers finding out ahead of time could save both parties a lot of time.

What are the potential Natural Hazards for where the home is located?

Is the home in a flood plain? If it is the lender could require flood insurance, the cost of this policy could affect the cost of living for the home. FEMA maintains free online maps that that will show if your home-to-be is in a flood plain. Once you have your information you can weigh your options and determine if the added insurance is feasible.

Where do you see yourself in five years?

It may sound simple, but really it boils down to, is this a forever home, or the first step on the property ladder that would bring you eventually to your dream home? Looking ahead five years can help you decide whether you see yourself staying in the area, or even at your job. Knowing your long term plan can help you to decide on where to compromise when deciding on a home’s features versus it’s price.

Once you’ve answered these questions you’re ready to see what’s in the market and I’m ready to show you. Using my Buyer’s questionnaire I’ll narrow our search to properties that meet your requirements ensuring the best use of your time. Then once we’ve found our dream home I’ll put my years of experience to use and negotiate the best deal, factoring in cost as well as seller concessions on closing costs and/or necessary repairs. So let’s start looking, today!

Preparing Your Home to Be Sold

Thinking about selling? 

Here is some great information from the Real Estate Staging Association on how to prepare your home for sale:

(For more tips and a free Market analysis, call me today!)