6.8 Million Former Homeowners Unlikely to Buy Again
Apr 22nd, 2015 @ 2:56 PM by Amber Nelson
Since the housing bubble burst in 2006, there have been almost 9.3 million homeowners who experienced a foreclosure, short sale or deed-in-lieu of foreclosure. Those who lost their homes at the beginning of the housing crash are now passing the seven-year waiting period required in order to get government-back mortgages. The NAR found that roughly one million borrowers have re-entered the market and it estimates that another 1.5 million are likely to buy homes again sometime in the next five years. Arizona, California and Florida are forecasted to see the biggest gains in those return buyers.
“The deep wounds inflicted on the housing market during the downturn are finally beginning to heal as distressed sales continue to decline and home prices in some parts of the country have bounced back to their near-peak levels,” said NAR chief economist Lawrence Yun. “Borrowers with restored credit will likely have the ability and desire to own again, encouraged by the long-term benefits homeownership provides in a stronger economy and more stable job market.”
Yet the vast majority will probably not be able to repair their credit enough or save a big enough down payment to buy again. That includes almost all of the sub-prime borrowers who entered the housing market en mass during the boom. Moreover, lending standards are still too tight to allow them back in.
“The extended time needed to repair credit scores or save for a downpayment, combined with other overlapping post-distress factors on credit quality such as missed auto loan or credit card payments, will limit the ability for many to buy in the current credit environment,” Yun said.
The long-term effect of those lost homeowners is yet to be determined.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.