Vail Daily column: A new wave of homebuyers may be coming
The economic upheaval caused by the Great Recession caused some pretty dramatic changes in how Americans have viewed their living situation for nearly a decade now. Millions of consumers lost their homes to foreclosure and millions more had multiple late payments on mortgages, credit cards and car loans. As a result, the percentage of homeownership dropped to record levels and demand for rental housing soared.
Even as millions of people found jobs again and settled old debts, they found themselves still ineligible to buy a home or faced paying a much higher-than-expected interest rate due to low credit scores. If one had a short sale or a foreclosure, the quickest that one could get a federally-insured loan would be three-to-five years and the negative impacts of late payments or a foreclosure on ones credit score could linger for up to seven years.
End of the foreclosure peak
The foreclosure peak for most of the country was in the second quarter of 2009, which is now seven years in the past, although my unofficial tally for Eagle County would put our local foreclosure peak towards the end of 2009 and early 2010.
So, as far as the impact of a late housing payment or foreclosure, the penalty phase is about over. Nationwide, a study by Trans Union estimated that about 7,000,000 families had their credit adversely impacted by the housing crisis, and in 2015, only about 15 percent would qualify, according to credit, for a mortgage loan. But it was also estimated that by 2019, at least half of those — more than 3.5 million — would be eligible.
What happens next
The question remains to be answered if those individuals will choose to buy a home again after going through the trauma of losing a home the first time. Certainly, a percentage of them will not want to take the plunge, but there are statistics that are showing a growing number of those individuals are re-entering the market. Home ownership in the 35- to 44-year-old group, which was hit hard by the housing crisis, has risen for two consecutive quarters
In Colorado, there is another unique twist to this equation. Compared to many areas of the U.S. our economy is booming and we have seen a wave of people moving into the state that has far outstripped the construction of new housing. As more of these families feel comfortable in their job security and any past credit issues fade away, it would seem probable that the demand for home ownership could increase faster than in other parts of the country.
In Eagle County, we have the unique twist of being in a highly desirable area with very little private land left to be developed. This dynamic has its own impact on the value of the existing housing stock and is great if you are one of the haves but not so great if you are one of the have not’s. As more locals and second homeowners decide they are able to buy the inventory of homes to buy shrinks and the price goes up.
Fortunately, right now, mortgage rates have settled to near 3-year lows. This is due to a variety of factors, including the Brexit fiasco and the prospect of having to choose the lesser of the evils for a President. Rates are generally in the mid- to high-three percent range for a 30-year loan, which helps ease the pain.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtnmortgageguy.com.