(CBS News) The U.S. housing market continues to stabilize and with that improvement is an increasing number of so-called boomerang buyers, former homeowners who lost their homes to foreclosure and are looking to buy again.
Nearly 5 million Americans were foreclosed upon during the Great Recession and 2.2 million of those homes were sold in short sale during the height of the downturn, CBS News contributor Mellody Hobson said. Seventy percent of once-foreclosed homeowners are expected to rejoin the housing market within eight years of their foreclosure or short sale, Hobson said.
Mortgage lenders are expected to be cautious as the housing market recovers and while the rules vary by lender, all lenders impose a required length of time necessary from when foreclosure occurred to when a homeowner can apply for another mortgage, as well a minimum credit score.
The Federal Housing Authority "says you have to wait three years before you can buy again," Hobson said. "[And] they want to see a FICO score of at least 640."
Why would once-burned homebuyers buy again? According to Hobson, it could be as as simple as the "American dream" of home ownership. Still, she adds that "really compelling prices" and "incredibly low interest rates" are also behind the uptick in boomerang home-buying.
"In many cases, it's cheaper to go and own a home than it is to rent one right now," Hobson said, explaining that the boomerang buying trend is most prevalent in the West, and Southwest U.S.
She expects the trend will soon move to major cities, including Chicago, Atlanta and Washington, D.C. "It's just the beginning," Hobson said, adding that boomerang buyers are increasing home values with their buying and as a result, they are "driving the boom" in areas that have been hard-hit by the recession.