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.