Brad comments on the return of the primary-residence buyer.
And here comes another shift in the real estate market.
A long, long time ago, buyers used to purchase homes for the purpose of actually living in them. Imagine! That was before the era of investors scooping up properties at rock-bottom distressed prices. It was even before the era of everyone and their cousin snatching up two, three, four houses or more, to try to cash in on the momentum of price-appreciation. Does anyone remember that?
And then, it all came crashing down.
Since the crash, more than five million foreclosures peppered our national landscape with abandonment: both abandonment of the properties in a literal sense, and abandonment of the home-owning experience, too. And that’s not even counting those who lost their homes due to short sales or deeds-in-lieu.
But we have short memories, don’t we? Time heals, doesn’t it? The reason I say that is because in a recent survey, more than 80% of former homeowners would like to get back in the saddle if given the chance. I hope that at the least, we have learned some lessons, and that we are too smart to allow history to repeat itself.
Further surveys indicate that a significant number of today’s prospective buyers plan to put up a larger down payment; that the average prospective buyer shoulders less household debt than they did ten years ago; and that many would-be (and scarred!) buyers have been humbled, and given the chance to buy again, would be more likely to select a property that fits better into their financial capability, rather than stretching themselves too thin.
Most former homeowners feel that renting is a step down, or a step backwards, and therefore, feel the urge to get back into home ownership. Now, in 2015, most of us agree that the worst of the housing crisis is in the rear-view mirror. And as time has passed since the wave of foreclosures and short sales occurred, many people find themselves with improved credit scores, higher incomes and a more honest and realistic picture of their financial capabilities. They are ready to buy once again.
At the same time, two market-place realities seem apparent and inevitable: real estate prices will increase, and mortgage interest rates will rise. The combination of these two factors will make homes less affordable in the future. In fact, prices have already risen enough to scare away a good chunk of investors, whose return on investment that could be obtained through buying and then renting out their properties has greatly diminished. So many people feel that the time to buy is now.
The U.S. is a country of homeowners. Owning your own home is part of the American dream, something that has been instilled in most of us since youth. And despite the past trauma of losing a home to foreclosure or short sale, most people will eventually shake off the negativity, consider themselves smarter than they were before, pledge not to repeat their “mistakes” from their last purchase, and plunge back into home ownership.
These so-called “boomerang buyers” will make up an increasingly large share of the marketplace this year and in subsequent years. A house will once again be a place to call home.
We have begun the march of the primary-residence buyer.