In 2013, singer-songwriter Lyfe Jennings introduced his hit song “Boomerang” (just ask your kids if you haven’t heard it!). The lyrics include the line “So throw me away, cause if I were a boomerang, I’d turn around and come back to you.” Likewise, in 2014 the housing industry will have a big hit from “Boomerang Buyers.” If you’re not familiar with this term, you’ll soon understand the analogy. From 2008 through 2013 there were 269,049 properties in the Greater Phoenix area that were either foreclosed or short sold. Those former homeowners that experienced defaults have for the most part been thrown out of the homebuyer market. But now in most cases, those former homeowners are eligible to purchase homes again. They’re coming back. Ergo, they are dubbed “Boomerang Buyers.” In 2013 the top two markets for “Boomerang Buyers” were Riverside-San Bernadino and Los Angeles.
The waiting period to qualify for a home loan after an event like a foreclosure or short sale varies depending on the type of mortgage. Short sale waiting periods for conventional loans range from 2 to 4 years, 3 years for an FHA loan. Foreclosure waiting periods range from 3 to 7 years.
Based on the number of short sales and foreclosures that have already taken place, Fletcher Wilcox at Grand Canyon Title Agency estimates that 42,444 previous homeowners that either short sold or were foreclosed on will have completed the three year FHA waiting period and will be eligible to purchase a home with an FHA insured loan in 2014. That’s a lot of boomerangs, and potentially a lot of homebuyers coming into a market that has slowed down in recent months. As the market shows slight signs of softening, now is a great time for boomerang buyers to come back.