NAr lowers projections for boomerang buyers

realtors accept reality that boomerang buyers will not return in large numbers.

shady_realtorEconomic predictions follow a repeating pattern. At first economists pander to everyone’s optimism bias and proffer predictions based on recent trends and dominated by wishful thinking. Later, when reality of data forces them to abandon their fantasies, economists downwardly revise their predictions, sometimes over and over again. Finally, once they’ve lowered their projections enough, the data finally matches their lowered expectations, and they claim prescience for their brilliant insights.

When the boomerang buyer meme first appeared, projections of “experts” (usually local real estate agents or mortgage brokers) confirmed that 80% or more of former owners would buy again. “It’s more than incremental business, that’s for sure,” adds Dan Klinger, president of K. Hovnanian American Mortgage.

By 2012 more reputable, but equally over-optimistic, analysts chimed in. John Burns, a reputable OC real estate analyst predicted that in 2013, “Foreclosed homeowners, who are currently renting homes, will come back in droves.” He predicted that 10% of home purchases in 2013 would be boomerang buyers, and this number would increase to 500,000 per year from 2013 to 2016.

Undaunted by the fact these buyers didn’t materialize, in 2014, he predicted 17.5% of home purchases would be boomerang buyers, and those numbers would also increase in 2015 and 2016. A post on his blog estimated nearly 50% of former owners would buy again, despite a federal reserve study that predicted only 10% would ever buy again.


I recently offered stunning proof boomerang homebuyers do not exist: Lenders originated just 2,162 FHA mortgages in the year through September 2014 for buyers with a previous foreclosure, according to the FHA. That was up slightly from 1,808 in the same period in 2013 — and this despite a relaxation of FHA qualifying rules that was supposed to add 2.5 million borrowers to the buyer pool. That’s a bit shy of the 500,000 mark, wouldn’t you say?

Well, even the perpetually overly optimistic (delusional) National Association of realtors is lowering their expectations.

Many Who Lost Homes to Foreclosure in Last Decade Won’t Return — NAr

Fewer than one-third of families who lost homes are likely to become owners again, Realtor group finds

By Laura Kusisto, April 20, 2015 12:50 p.m. ETboomerang_missed

Less than one-third of families who lost their homes to foreclosure or other distress events in the past decade are likely to become homeowners again, according to an analysis by the National Association of realtors.

Ten percent is certainly less than one-third, so the NAr is on the right track here, but they still need to lower their implied expectations to match reality.

More than 9.3 million homeowners went through a foreclosure, surrendered their home to a lender or sold their home via a distress sale between 2006 and 2014. Of those, about 2.5 million either have already jumped back into the housing market or will do so within the next eight years because they have the financial ability to purchase and are eligible for a mortgage, according to the Realtor group.

Of the 2.5 million referenced above, less than 1% own today, so the remaining 99% is conjecture and wishful thinking.

Most of the rest won’t be eligible to borrow or won’t have the desire to buy again, the analysis found.

Federal reserve analysts came to this conclusion years ago, but everyone chose to ignore reality in favor of their more emotionally satisfying dream.


Real-estate agents and economists have been anxious about the return of formerly foreclosed upon homeowners,

Anxiety is a classic side effect of pinning hopes on fantasy. It requires energy to ignore reality.

whose re-emergence could boost the housing market and the broader economy. Borrowers who went through a foreclosure or other negative event are ineligible to obtain a government-backed mortgage for up to seven years afterward. For families who lost their home in the early years of the crisis, the penalty phases are ending, creating optimism about a large new pool of potential homeowners.

These penalty phases were rolled back years ago, and boomerang buyers didn’t materialize. The analysis below is from 2012, and that was before the FHA shortened the waiting period by two years in 2013.


But Lawrence Yun, chief economist at the Realtor group, cautions that the pool may not be as large as some are expecting.

Mark this day as an epic event in the history of real estate market analysis: I agree with Lawrence Yun.

Many won’t return because they are unlikely to improve their credit or income enough to qualify for a mortgage. Even those who have decent credit will be held back by “overly stringent” lending standards. He estimates that 490,000 buyers who are or will be eligible for mortgages backed by the Federal Housing Administration and similar programs won’t qualify unless there is a loosening of stricter-than-normal requirements.

Others, he said, won’t return due to lack of desire to own a home after being burned during the crash.

A rare moment of truth from the NAr. I’m speechless.

Still, the 2.5 million buyers that the Realtors expect to return will have a significant impact on housing, especially in California, Florida and Arizona, the report said.

The spin and bullshit needed to follow that gaffe.

Nicole Brule-Fisher, president of the Tucson Association of Realtors, said that agents there are already seeing a number of buyers return after foreclosure. And unlike during the boom years, buyers today are more cautious. “They’re looking at it as what they’re going to be living in as a home, as opposed to that old mindset…they’re going to flip it in a few years because they’re going to double the value,” she said.


Brokers said they have been counseling their clients to work on their credit scores, rather than becoming defeated and assuming they can never own again. … “They’ve lost their place but that doesn’t mean they have to be a renter for the rest of their lives.”

God forbid they have to spend the rest of their lives as lowly renters. The shame would be unbearable… not.

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