By: Scott Pearson, Pearson Realty
Back in 2008, many people learned a valuable and expensive lesson, a lousy loan on property which is losing value can really mess up anyone’s financial situation. For some, the solution was to ride out the storm while refinancing their loan to take advantage of lower interest rates. By waiting a few years and allowing corrections to occur in the market, the value of their home was restored, in whole or in part, by rising home values inside the beltway.
For others the path was much worse. Not able to refinance due to a lower home value; perhaps stuck with onerous terms under their mortgage, some people lost their homes via foreclosure or a short sale. A short sale means the bank agreed to a sale for less than the value of the mortgage balance. In either case, the homeowner no longer occupied their home.
Although the market will always produce some foreclosures and short sales, Annandale has seen very few, even during the worst of the economic downturn. And with the rising value of homes in the Annandale region (between 3-5% per year since 2008) fewer homeowners are under water which enables them to refinance mortgages.
What the market is also experiencing is that some people who lost their homes in 2008 or 2009 are becoming home buyers again. These people are being called boomerang buyers because they have come back into the market a little wiser than when they were forced out. Various studies show that about 10% of current buyers are, in fact, boomerang buyers. The difference between boomerang buyers and some others is that boomerang buyers are much more conservative in their approach to buying. They understand they can afford only so much house and not more. They are less likely to get into bidding wars; they are very conscious of the effects of financing; they study comparable properties in the area; and, weigh risk factors they may not have considered in their previous home buying experience.
Boomerang buyers tend to be two-income couples with a young family and steady employment. Over the past few years they have saved money for a down payment, so they won’t get hit with mortgage insurance payments and can qualify for favorable interest rates.
They also tend to be patient buyers who plan carefully. For example, if they are renting now, they will start looking for a house six months before their lease expires to give themselves plenty of time to study the market, compare possible homes to find the one they like, as well as one they can afford, and will hold its value over time. Representing a boomerang buyer requires patience by the real estate agent, but the upside is that this is an informed, rational client.
I believe we will see a lot of boomerang buyer activity over the next few years because Annandale provides such a broad variety of quality homes at very competitive prices. In Annandale, a couple can obtain an home, in a prime location, without paying too much for cachet. Let’s face it, pragmatists love Annandale and that’s what this is about. A renewed, pragmatic approach from one sector of the market.
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