This email from Jeff, brings up a good point.
As people who have been previously foreclosed on or who have had a short sale get their credit restored, what effect will that have on the demand for homes?
I think Jeff makes a good point. As those folks who were previously foreclosed on or who had a previous short sale become qualified again to take out a mortgage loan, demand for homes will improve.
That will add some “new” demand for homes. However we’ll continue to see foreclosures and short sales for years to come. So it’s a battle. Some folks will be re-entering the housing market because they can now get credit (after a foreclosure or short sale) and some folks will be falling out of the housing market after having a foreclosure or short sale and being blackballed by the lenders, underwriters and loan guarantee agencies.
But compared to right now where all the movement is toward cutting the number of potential home buyers, any inflow of “new” home buyers would help buoy the market.
As former homeowners start to re-enter the market, it just means more money can go into home purchases. A big determinant of home prices is the amount of money chasing homes.
I’m one of your silent blog admirers. I love to read your insights into the real estate market in AZ, and I wonder if you had any thoughts or opinions on one point in particular: what is happening to those who went into foreclosure or short sale over the last few years?
If we say that the foreclosures and short sales began to occur in 2007 and are still going strong, is it reasonable to assume that many of these people are not currently home owners due to bad credit? These people might fall into one of the following categories:
- Currently renting a home but will buy once their credit is restored
- Currently renting, and have been permanently disillusioned by real estate and may never buy again
- Own a home they purchased on a “buy and bail”
- Living with other family members until credit is restored
- Still live in the same house (it was a second home or investment property which foreclosed)
From what I understand, those in categories 1 and 4 would not be able to purchase a property for about 4-5 years. If this is the case, would it be reasonable to assume that these people will begin to jump back into the real estate market in 2011-2015? If so, do you think they might help this market continue to turn around over the next few years? If they make up a big chunk of the market, one could look at the number of foreclosures and short sales occurring in each of the last couple years, invert those numbers, and predict a healthier market. For example, if there were 5000 foreclosures/short sales in 2007, 10000 in 2008, and 15000 in 2009, could you say that in 2011 there may be about 5000 more buyers for the market, in 2012 there will be another 10000, and in 2013 there will be 15000?
Have you ever thought about this or read/heard anything on this subject?
What do you think?