Everyone remembers the housing crisis that hit Americans in 2008. According to the National Bureau of economic interest, America's housing bubble burst led to a substantial fall in home prices. When the value of homeowners' property decreased so quickly, it left many Americans with mortgages that were higher than the price of their homes. Many individuals wound up defaulting and foreclosing.
The Impact of the Burst
According to RealtyTrac, nearly 3 million homeowners filed for foreclosure at least once in 2009. Foreclosure activity increased 25 percent from 2008 to 2009.
"As bad as the 2009 numbers are, they probably would have been worse if not for legislative and industry-related delays in processing delinquent loans," said James J. Saccacio, chief executive officer of RealtyTrac. "After peaking in July with over 361,000 homes receiving a foreclosure notice, we saw four straight monthly decreases driven primarily by short-term factors: trial loan modifications, state legislation extending the foreclosure process and an overwhelming volume of inventory clogging the foreclosure pipeline."
These substantial numbers left many Americans in quite the predicament.
"Despite all the delays, foreclosure activity still hit a record high for our report in 2009, capped off by a substantial increase in December," Saccacio continued. "In the long term a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog."
In total, 7.3 million homeowners wound up losing their home due to either short sale or foreclosure. While this is a substantial chunk of the nation, these previous homeowners might be ready to reenter the housing market and invest in real estate once again.
Boomerang Buyers Are Coming Back
RealtyTrac indicated the first wave of what is commonly called boomerang buyers, or individuals who lost a home in the crash and are looking to purchase again, is expected to enter the market relatively soon. Seven years after the burst, many individuals have had time to repair their credit, which allows them to better qualify for a U.S. home mortgage.
My FICO indicated foreclosure will remain on an individuals' credit report for about seven years. It's impact will decrease over the years, and the score itself can improve in as little as two years.
"The housing crisis certainly hit home the fact that homeownership is not for everyone, but those burned by the housing crisis should not immediately throw the baby out with the bathwater when it comes to their second chance at homeownership," said Chris Pollinger, senior vice president of sales at First Team Real Estate. "Homeownership done responsibly is still one of the best disciplined wealth-building strategies, and there is much more data available for homebuyers than there was five years ago to help them make an informed decision about a home purchase."
Between 2015 and 2018, RealtyTrac forecast more than 4 million boomerang buyers will invest in a home.
Homeownership Is a Possibility
For boomerang buyers, becoming a homeowner once again can happen. It will take a little work, but as the economy improves and the housing market continues to bolster, this is a great time to invest in a home.
Bankrate recommended improving your credit score to ensure you lock in the best interest rate for a house.
"Your first objective is that since you're going to have to wait, make sure the rest of your credit is clean," said Bert Carpenter, a loan officer at Nova Home Loans "That way, when you move into the phase when you're almost out of your penalty period, you'll know it's just a matter of waiting."
In addition, it is important to provide a down payment for a home. While prior loans may have not required this in the past, at least a 3.5 percent down payment is required for a loan through the Federal Housing Administration and a 20 percent down payment must be provided to avoid paying mortgage insurance.
If you are interested in becoming a homeowner once again, make sure you speak with a professional to ensure you take the proper steps. It's a very real possibility that you can once again own a home of your own despite the housing crisis, noted the Wall Street Journal. As the economy has improved and more individuals have accessed home loans, boomerang buyers can also take advantage of the opportunity.
"The dark shadow of the foreclosure crisis is finally beginning to fade," said Mark Zandi, chief economist at Moody's Analytics, a unit of Moody's Corp, according to the Journal. "That should be a positive for single-family housing and, by extension, for the broader economy."