According to Best Rate Home Loans, many metro areas, including Chicago, Miami and Boston, are outweighing the national market in their offerings of discounts on foreclosed homes. This comes at a time when the economy and housing market are returning to healthy levels again.
According to RealtyTrac, the foreclosure discount savings in Chicago for April is $138,500. That is the difference in price between a distressed and a non-distressed home. Distressed can indicate the home has structural or cosmetic defects, but lately homes that have been foreclosed upon or been through a short sale have also been labeled as distressed, despite being otherwise sound. This makes the distressed-home market especially juicy for FHA-eligible boomerang buyers, who are now able to return to the market.
We covered boomerang buyers in a previous article, but here is the definition again: “‘Boomerang buyer’ is a term coined by the Wall Street Journal, used to describe an individual who lost their home to foreclosure after the housing crash six years ago, but are now back in the housing market. The Federal Housing Administration says it takes approximately three years for buyers to wait before becoming eligible for a mortgage again, and these buyers are ending their waiting period now. Hundreds of thousands of buyers are in this category.”
Although it is unknown why the foreclosure discounts in metro areas are so high, economists have agreed on one thing: “Job loss has become the leading cause of the increase [in foreclosure inventory],” said the Huffington Post in a recent article. “Falling home prices erode homeowners’ wealth, making them more vulnerable to default and foreclosure.” Job-loss has been especially bad in Metro areas, which perhaps contributes to the number of foreclosed homes in those areas.
Boomerang buyers who have lost their homes are now entering a market with low FHA mortgage rates and down payments starting as low as 3.5 percent. “Boomerang buyers have been finding tremendous savings through foreclosure properties, and much of this is occurring in large cities like Miami, where despite the ability of many to rebound financially since the recession, great foreclosure inventory is still available,” says Chris Brown of Certified Mortgage Planners in Lake Mary, Florida.
This trend of high foreclosure discounts may be diminishing. RealtyTrac data reported a five percent fall in the number of foreclosure properties entering the market in the last month. It has fallen 23 percent year over year. This is in line with the trend nationwide for foreclosure rates and home inventory to fall in unison with the rising housing market.