Cities that were hardest hit by foreclosure are going to see an upsurge in demand by boomerang buyers, cities like Phoenix, DC, Detroit, Miami and Las Vegas.
This is based on assessment of foreclosure rates, affordability and demographic data by RealtyTrac. A boomerang buyer is one of the seven million homeowners who lost their home to foreclosure during the recession.
Basically, it takes seven years for foreclosure to disappear from a credit score. Many of those who got hit by recession in 2008 and 2009 are getting their slate wiped clean and reentering the market. Millions of consumers’ credit report will no longer reflect past mortgage problems.
Between June 2016 and June 2017, 2.5 million foreclosures, short sales and bankruptcies will fall off credit reports, according to facts by Experian. Many of these boomerang buyers have had enough time to work on boosting their credit. So Experian’s research further adds that 68% of boomerang buyers have high or near prime credit scores, which will improve their odds of getting good rates on the mortgage.
However, comparing short sales between 2007 to 2010, it can be concluded that short sales make it easier to bounce back into the market. Experian’s research reveal that 29% of short sale sellers during the recession have reentered the market and secured a new mortgage compared with just 12% of foreclosed home owners.
“With millions of borrowers potentially returning to the housing market, the trends we are seeing are promising for the mortgage applicant and the lender,” said Michele Raneri, vice president of analysis and new business development at Experian, in a news release.
In the coming years, boomerang borrowers will be a critical segment of the real estate market.
While many of these borrowers have gone through a tough time, it is inspiriting to see them taking control of their finances with better credit scores and better credit management.
Credit scores for these boomerang borrowers have improved, Experian observed. Individuals who applied for a mortgage loan subsequent a foreclosure have an average VantageScore credit rating of 680, representing a 20.8% rise from when they went through the foreclosure. And the median credit score for short sellers has risen to 706, an increase of 16.5% from the time of the short sale.