Foreclosed us homeowners begin return to market
Oceanside, California Photo: JoeinSouthernCA
Almost 10 years after the housing crisis struck America, homeowners who suffered foreclosures are beginning to return to the property market.
Nearly 9.3 million homeowners that underwent a foreclosure, received a deed-in-lieu of foreclosure, or short sold between 2006 and 2014.
Lawrence Yun, chief economist at the National Association of Realtors, says there were two waves of defaults during the housing crisis: from subprime and then prime borrowers.
"While loose lending standards in the mid-2000’s led to the rise in subprime buyers who ultimately became distressed owners, falling home prices and rising unemployment resulted in a large share of prime borrowers also defaulting or going through a short sale," he explains.
Now, though, fueled by the gradually improving economy and the strong rebound in home prices, some of these former distressed owners have returned to the market.
California, Florida and Arizona are expected to see the largest share of return buyers within the next decade, according to NAR research.
The findings reveal nearly a million of these former owners have likely already purchased a home again, and an additional 1.5 million are likely to become eligible and purchase over the next five years, representing an additional source of buyer demand for the housing market. However, because of low credit quality, millions more will not be able to re-enter in the coming decade.
"Damaged credit profiles and lender overlays will greatly restrict the overall share of those eligible to buy," says the NAR.
The research follow separate figures from the NAR that found investment sales declined to 19 per cent of all property transactions in 2014, while holiday home sales increased.
"Despite strong rental demand in many markets, investment property sales have declined four consecutive years to their lowest share since 2010 as rising home prices and fewer distressed properties coming onto the market have further reduced the number of bargains available to turn into profitable rentals," said the report.
Indeed, US property dominated activity on TheMoveChannel.com for most of 2014, but in recent months, has fallen in popularity among overseas investors, as house prices rise and the dollar strengthens, prompting them to turn to more affordable European markets.
Looking ahead, as domestic buyers begin to return to the US market, Yun says that because of the time that has elapsed - and the fact that many distressed owners likely rented and paid utility bills in recent years - the use of new credit scoring models, such as Vantage Score 3.0 and FICO 9, can help improve their ability to become homeowners again.
"The deep wounds inflicted on the housing market during the downturn are finally beginning to heal," he adds.