According to Realtytrac, nearly 7.3 million people who have had their homes foreclosed on during the recession will once again be able to buy a home in the next 8 years. More than 500,000 foreclosed on homeowners will be eligible for a new home loan this year.
In general, homeowners can recover from a foreclosure in as little as three years. Realtytrac gives a more conservative number—seven years—for how long it will take these people to rebuild their credit score. By doing the math, homeowners who lost their homes in 2007 and early 2008 should now be able to qualify for financing.
As previously mentioned, 500,000 of these homebuyers, a.k.a. boomerang buyers, will be able to become homeowners once again in 2015. Next year, 1 million additional homebuyers will be added to the pool. By 2018, that number increases to 1.3 million. Low mortgage rates, low mortgage insurance rates, and new low down payment mortgages have also freed up more of these homebuyers.
Oddly, these buyers will most likely be able to find homes they can afford in markets that had originally put them in their unfortunate situation. Towns and districts with high foreclosure numbers during the recession still have the most affordable home prices. Hopefully, with that negative experience still on the forefronts of our national conscience and with the new government regulations enacted since, these buyers and their lenders will not find themselves falling into the same pattern that occurred during the recession.
Assuming all goes well, having more buyers return to the market will help the housing sector of the economy grow. Home prices may rise slightly, but having a big base of homebuyers should provide more stability and confidence for builders who can increase home inventory without concern.