Early in the housing crisis, financial experts estimated it might take up to seven years for people who lost a home through a foreclosure or short sale to qualify for a mortgage to buy again.
Thousands of new Phoenix-area homeowners are proving the experts wrong. These “boomerang buyers” — so called by real-estate insiders because they were out of the market and have now come back — have returned as a major market force much earlier than expected. Many buyers are qualifying for a new loan only a few years after defaulting on their last mortgage.
Boomerang buyers are expected to account for almost one in every five home sales in metro Phoenix this year, according to a national housing analyst. That’s double the projected U.S. rate.
The boomerang phenomenon is being driven by several factors. Many former owners face rising rents, and now that their finances and the housing economy are more stable, they want to own again. And many of these tens of thousands of metro Phoenix families who are renting are attractive to mortgage backers and some lenders again because they have rebuilt their credit and because any purchases they make add strength to the real-estate recovery.
“Probably 25 to 30 percent of the borrowers calling us now have had a short sale or foreclosure in their past,” said Mike Metz, managing director of Scottsdale-based Sun State Home Loans.
Lenders and government agencies backing mortgages do require steep down payments and decent from most boomerang buyers. The sooner a loan application comes after a foreclosure or short sale, typically the more up-front money is required.
These former homeowners, like many other prospective buyers, are scrambling to make a deal before home prices and interest rates climb too high.
“Foreclosed homeowners who are now renting are in a panic,” said John Burns, a national real-estate analyst.
Metro Phoenix has a bigger pool of potential boomerang buyers than most areas. More than 250,000 houses in the region were foreclosed on during the crash, and 80,000 other borrowers sold homes through short sales to avoid foreclosure.
Approximately 22,000 home sales, or 19 percent of all home sales, in metro Phoenix this year will involve boomerang buyers, according to an estimate by Burns’ company, Irvine, Calif.-based John Burns Real Estate Consulting.
“Phoenix is the third-biggest U.S. market for boomerang buyers,” Burns said. The California metro areas of Riverside-San Bernardino and Los Angeles are No. 1 and No. 2, respectively.
The many prospective buyers also face a challenging market in metro Phoenix because of the shortage of the number of affordable properties for sale.
Phyllis Borchardt is one recent boomerang buyer.
She and her husband, Larry Fetkenhauer, bought a Sun City Grand home in May for $138,000, blocks from the house they had rented for three years. The couple had moved from Temecula, Calif., in 2005 and bought a house for $250,000 in Buckeye.
As home prices fell and Phyllis’ business as a real-estate agent brought in less money, the couple tried to refinance to lower their mortgage payment through the federal Home Affordable Refinance Program, or HARP. After submitting documents to their lender for a year, the couple still weren’t approved for a loan with a lower interest rate. Then, in 2010, Fetkenhauer lost his job as a kitchen designer at one of the big-box home-improvement stores.