The housing story of Joann and Oscar Flores over the past 13 years is one of a rollercoaster relationship with homeownership — closely shadowing the ups and downs of the US real estate market during the same period.
The Flores family first became homeowners in 2002 with the arrival of their first daughter and moved up into a bigger house in 2004 with the arrival of their second daughter. But then they lost that home to foreclosure in 2008 after their housing payment nearly doubled, and they had no equity to refinance into a better loan.
In 2015, they became homeowners once again after nearly seven years in renter purgatory.
“The neighbors were horrible,” Joann Flores said of the townhome the family rented; they opted for that instead of renting a single-family home, so they could save up to buy again. She says the neighbors would complain when her daughters played in the common area of the community because they had no yard to play in. “This was a sacrifice. This was going to motivate us to get out.”
And get out they did, closing on a home five miles from the home they lost to foreclosure and in the same school district. Their new home has four bedrooms and three bathrooms — just like the one they lost to foreclosure nearly seven years ago — but the new one has a pool.
“If it doesn’t have a pool, don’t show it to me,” Joann recalled telling her agent, Bob Irish, a broker with Lake Hills Realty who also worked with the family back in 2008 to try to sell their former home via short sale to avoid foreclosure.
No script for saving homes
That short sale attempt didn’t work out, even though, in hindsight, the bank would have been better off agreeing to a short sale, says Irish, who submitted an offer for $420,000 that the bank refused in favor of foreclosure — only to sell for a much lower price after foreclosure. Public records from RealtyTrac show that after obtaining the property through foreclosure on Oct. 17, 2008, the lender, “US BANK NA SERIES 2005-11,” sold it to a third party on Aug. 14, 2009 for just $215,000.
Joann Flores recalled at the time watching a speech by President Obama in which he said banks should work with homeowners to avoid foreclosure. After watching the speech, she called her bank asking what help they could provide only to be met with an underwhelming response.
“They told me, we have no script for this, we don’t what to tell you,” she said, adding that even as the bank was turning down short sale offers she was also getting “harassing phone calls from the mortgage company,” including one conversation in which she was told she needed to learn to manage her money better.
“We ended up foreclosing on the home, which was just devastating … Everything that we put into the home, we were just walking away from it,” she said.
“At that time short sales were really tough,” Irish said. He notes that he went on to do as many as 60 to 70 short sales in 2012 at the height of the short sale tsunami after many banks bought into the philosophy of cutting their losses upfront.
Converging waves of boomerang buyers
The short sellers Irish worked with in 2012 are approaching the end of the three- to four-year penalty period typically needed to repair credit and qualify to buy again after a short sale. Although many of those who lost their homes in the first warning wave of the foreclosure crisis in 2007 — such as the Flores family — are at the end of the seven-year penalty period needed to repair credit after a foreclosure.
“After seven years of short sales, I only had a few that were coming back, but in the last few months I’ve had a lot of them calling back,” Irish said, noting that an FHA program allowing some short sellers to buy again after two years had limited success. “It wasn’t a great program; it never helped any of my boomerang buyers. Now at three or four years (for short sellers) and seven years for the foreclosure you have more people that qualify.”
According to RealtyTrac data, the Flores family is just part of the first wave of nearly 7.3 million potential boomerang buyers who lost their homes to foreclosure or short sale between 2007 and 2004. That first wave consists of about half a million homeowners who lost their homes in 2007. And it’s followed by much bigger waves of more than 1 million potential boomerang buyers who will move out of the seven-year window in each of the next four years, through 2019.
According to the National Association of Realtors, if even just half of these potential boomerang buyers follow in the Flores’ footsteps, they could have a significant impact on the housing market over the next five years. This is because an average of 4.9 million existing homes have sold per year over the past three years. An influx of half a million to 650,000 boomerang buyers in each of the next five years would represent 10 to 13 percent of sales in a typical year.
Top markets for boomerang buyers
The two-county Inland Empire region of Southern California, where the Flores family bought in both 2004 and then again in 2015, has 269,419 potential boomerang buyers over the next seven years — the sixth highest number of any metropolitan statistical area in the country. The top five are Phoenix (348,329), Miami (322,141), Detroit (304,501), Chicago (300,147), and Atlanta (280,019). The Los Angeles metro area, composed of Los Angeles and Orange counties in Southern California, comes in at No. 7 with 264,562 potential boomerang buyers.
“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,” says Chris Pollinger, senior vice president of sales at First Team Real Estate, which covers the Southern California market. “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.”
Daren Blomquist is the vice president of RealtyTrac.