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Boomerang Buyers Hitting The Market

by Galand Haas

Good Monday Morning!

The national housing market could be very close to seeing a huge surge in the number of homebuyers actively looking for and purchasing new homes.  This is a surge that is sure to hit the housing markets acrosss the nation and have a huge impact at some time soon.  The following is an interesting article about "Boomerang" buyers from "Realty Times".

Remember all those people who defaulted on their homes during the last housing crisis? Well, those bankruptcies are about to be discharged, or they already have been, and that means we could soon see an avalanche of homebuyers hitting the market.

Just what constitutes an avalanche? "More than 12.8 million homes entered the foreclosure process - roughly 29 percent of all homes with a mortgage," between 2007 and 2014," said The BIG Picture. "At the peak of foreclosures in 2009, more than 650,000 homes, 1.5 percent of those with a mortgage, entered foreclosure in a single quarter."

According to CoreLogic, this is a key year for boomerang buyers because seven years have passed since the peak of foreclosures in 2010. A whopping "1.9 million homeowners who faced owner-occupied foreclosures between the start of the housing crisis in 2007 through 2010 will have met the seven-year period after which the Fair Credit Reporting Act requires derogatory information to be removed," they said. "By the end of 2020, another 1.2 million homeowners who lost their homes to foreclosure between 2011 and 2013 will become eligible."

A new TransUnion Study Found that, "1.5 million homeowners negatively impacted by the mortgage crisis could re-enter the housing market in the next three years."

But do they want back in?

Many think so.

"The chief attraction is strong motivation, Kent Temple, broker/owner of Keller Williams Realty - The Temple Team in Mooresville, N.C., said on Bankrate. "If you've been through a foreclosure, you've already been a homeowner. "You know what it's about. You know the process. You've been through hell sometime in the last seven years, and if you really want to buy a house, you are so willing to do whatever it takes."

But some aren't so sure.

"As those foreclosures began to clear, many observers speculated that a slew of ‘boomerang buyers' was poised to return to the housing market," said The BIG Picture. "Those buyers have been slow to materialize. So what's hindering their return?"

Oh, little things like:

  • Rising home prices
  • Rising mortgage rates
  • Low inventory
  • More stringent lending requirements
  • Credit scores that haven't jumped back up to where they need to be because of other delinquency issues

There may also be the fear factor. Do buyers who lost a home to foreclosure once before want to take the risk again? If they do, they are largely looking to be more careful this time around, said Jami Harich, a real estate agent with Avery-Hess Realtors in Fredericksburg, VA, in the Washington Post. "Most buyers I work with now, especially if they lost a home in the past, don't want to get in over their heads. They start with a monthly payment that they want to stick to, and then I show them what they can find on the market that fits in that budget."

Whatever their reasoning, "History says not all those buyers are likely to come back," said The BIG Picture.

"According to a 2016 study by CoreLogic, fewer than half of those who lost a home in 2000 or later have purchased new homes, even among those 16 years past a foreclosure." The boomerang rate has been especially low so far for people who lost their homes during the crisis. A little over 30 percent of borrowers who lost their homes in 2000 had purchased another home seven years after the event. But only about 15 percent to 20 percent of borrowers who lost a home between 2006 and 2008 had returned to the housing market after seven years."

Quick or slow

Perhaps it's the rate at which boomerang buyers have been returning (or not) to the market that has surprised industry experts the most. Instead of the rapid return like many had predicted, the boomerang effect has been more tempered, according to CoreLogic.

"While millions of former homeowners reentering the buying market would have a significant impact on home sales, historical data shows a more gradual return rate for these so-called boomerang buyers, with less than half returning to homeownership even 16 years after the foreclosures were completed. Historical return rates show recent incremental volumes of 150,000 boomerang buyers returning per year, or 12,500 per month. Of the 4.4 million owner-occupied foreclosures completed since 2000, 1 million foreclosed homeowners have returned."

Have An Awesome Week!

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Latest Market Activity for July 2017

by Galand Haas

Good Monday Morning!

The sales numbers are in for July 2017 home sales in the Eugene and Springfield market areas.  Although, sales cooled slightly and the inventory also increased, the overall sales market remains strong.  Here is the report.

Lane County saw some cooler activity this July, but some measures are still ahead of last year. Closed sales, at 502, outpaced July 2016 (418) by 20.1%, despite a 1.6% decrease from the 510 closings recorded last month in June 2017.


Similarly, new listings (678) edged 1.2% ahead of the 670 new listings recorded last year in July 2016, but fell 4.9% short of the 713 new listings recorded last month in June 2017.

Pending sales, at 541, cooled 1.5% from July 2016 (549) and 0.6% from last month in June 2017, when 544 offers were accepted in Lane County.

Inventory rose in Lane County this July, ending at 2.0 months. In the same period, total market time decreased by four days, ending at 36 days.

Year to Date Summary

Comparing the first seven months in 2017 to the same period in 2016, closed sales (2,863) have increased 1.1% and new listings (4,086) have stayed exactly the same, while pending sales (3,245) have decreased 3.4%.

Average and Median Sale Prices

Comparing 2017 to 2016 through July of each year, the average sale price rose 9.6% from $259,700 to $284,700. In the same comparison, the median sale price rose 9.2% from $234,400 to $255,900. 


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Which Mortgage Is Best: Low or High Down Payment?

by Galand Haas

Good Morning!

I am often asked about home mortgages and what home loans are the best way to go.  There are many options out there today and some options are certainly better than others depending on your situation.  The following article is from "Realty Times" and it talks about the differences between loans with low down payments and those with higher downs.  

The minimum down payment on an FHA loan is 3.5 percent, which makes it a popular choice among those who don't have the funds for a large down payment (and also those who don't meet the higher credit score requirements for other types of loans). And that's not even the lowest you can go. Loans like this one require only three percent down, and if you're a veteran or are buying a home in a rural area, you may be able to buy a home for nothing down. But should you go that low just because you can, or are you better off making a larger down payment? We're breaking it down.

The case for 20 percent

There are several advantages to putting down 20 percent when buying a home, like:

  • Since the bank will generally consider you a lower risk because you have "more skin in the game," you may be able to get a lower interest rate than you would with other types of loans—as long as you have the credit score to support it.
  • You'll have built-in equity as soon as you move in.

    You can avoid paying private mortgage insurance (PMI).

  • It's that last part that drives a number of people to strive for that 20 percent down payment since PMI can add several hundred dollars to a new homeowner's monthly payment, and it can be hard to get rid of it. "If you can put 20% down and avoid PMI, that is ideal, said certified financial planner Sophia Bera on Business Insider.

 

The case for as little down as possible

The biggest roadblock to homeownership for many people is coming up with the down payment, so minimizing that expense sounds great, right? "The good news is a first-time buyer can purchase a home for a little as three percent down - and even no money down in some cases," said U.S. News.

But is that a smart move?

"The less you put down, the higher the mortgage insurance is," Casey Fleming, author of "The Loan Guide: How to Get the Best Possible Mortgage" and a mortgage professional in the San Francisco Bay Area, told them. "With five percent down, the mortgage insurance is quite high." 

Yep, there's that pesky PMI again, which, for many first-time buyers, pushes their monthly payment to a level they're not comfortable with. Another bummer about PMI: "If you need to pay PMI, the size loan you can get will be slightly smaller, to allow for the bigger payment," they said.

You may also have trouble qualifying for a loan even if you have a high enough credit score because you don't have enough cash reserves; if you are using all your savings for the down payment and the lender questions where the funds for your closing costs, taxes and insurance, and any needed repairs are coming from, you could have a problem.

But, on the flip side, a smaller down payment will up your rate of return, said The Mortgage Reports. "Consider a home which appreciates at the national average of near five percent. Today, your home is worth $400,000. In a year, it's worth $420,000.

Irrespective of your down payment, the home is worth twenty-thousand dollars more. That down payment affected your rate of return. With 20 percent down on the home - $80,000 - your rate of return is 25 percent. With three percent down on the home - $12,000 - your rate of return is 167 percent."

Even when you add in the PMI and a higher interest rate, the equation comes out in favor of the lower down payment. "With three percent down, and making adjustments for rate and PMI, the rate of return on a low-down-payment loan is still 106 percent - much higher than if you made a large down payment. The less you put down, then, the larger your potential return on investment."

The case for somewhere in between

Finding that balance between down payment and savings is a challenge for many homebuyers, and the sweet spot will be different for everyone depending on their unique circumstances and financial situation. Most financial experts will say that saving and scrounging to get together 20 percent at the risk of depleted savings and zero emergency funds is a shaky strategy, at best.

"If putting 20 percent down means that you use all of your savings, then don't do it! I would much rather see people put five percent down, wipe out all their other debt with cash, and still have three months of emergency savings versus putting 20 percent down on a house," said Bera.

Especially when you consider all the added costs you may be facing once you buy: "yard work, home repairs, renovation costs, property taxes, insurance, etc. It's important to consider all of the costs and not just compare the monthly mortgage payment to your current rent amount," she said.

Another thing to consider when evaluating how much you should put down is what would happen if you had an emergency. It's easy to lose sight of real-life issues that can arise when you are so driven to buy a home and focused on saving the money to get there.

"A financial event can leave you wishing you had access to the money without selling," said The Mortgage Reports. "Say you lose a job for three months. An extra $20,000 would be a nice safety cushion. And, if you lose your source of income, you can't take home equity out via a cash-out refinance or home equity line of credit (HELOC). Lenders won't approve a new loan to someone between jobs. In short, the more you need to get at the money, the less access you have to it."

If you have further questions on home loans, contact me.  I work with some of the best mortgage professonals in the Eugene and Springfield area and I can get you connected with one of them.

Have an awesome day!

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This Month in Real Estate August 2017

by Galand Haas

Good Morning!

Home prices continue to rise both here in the Eugene and Springfield area and nationally.  In many parts of the country, home sales are begiining to slow.  This could mean that we have reached a point where there is resistance to home pricing.  When this occurs, we will typically see a market slow down that is extended and inventories of homes for sale that begin to build.  All of this happens until there is enough pressure on home pricing that it begins to drop.  Then the cycle starts all over again as home prices become more affordable, demand increases and prices begin to rise again.  This is the cycle of home sales that repeats itself over and over again.  We have had a long run with home values increasing, so the inevitable is most likely on the horizon.

Have An Awesome Week!

Video Link: http://eugeneoregonhomesforsale.com/video/This-Month-In-Real-Estate-August-2017

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Galand Haas Team
Keller Williams Realty Eugene and Springfield
2644 Suzanne Way
Eugene OR 97408
Direct: (541) 349-2620
Fax: 541-687-6411

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