It is interesting to look at large groups when it comes to market influence and how they are formed.  In the past, we have discussed how baby boomers and investors, for example, have influenced our market. Over the past few years the rate of homeownership has declined, and thus the rental market has been booming.  The decline in homeownership is the result of pure economics.  The buyers are coming, but they still have some major challenges to overcome.  This large group of buyers that was created by economic factors,  has been branded “boomerang buyers.”  Boomerang buyers are defined as potential home buyers who were previously displaced from their homes due to a foreclosure or short sale. At present, the vast majorities of these potential buyers are unable to return to the market due to credit and down payment requirements. From a statistical perspective these potential buyers might best be defined as “pent up demand,” or  “shadow demand.” Here are some guidelines that this group of buyers must follow:

FHA: Homebuyers can take out loans for up to $271,060 in Maricopa County. People who went through foreclosures must wait three years and have a 3.5 percent down payment. Some borrowers who completed short sales with special circumstances, such as a deed-in-lieu situation or problems with a loan modification, are eligible for a loan within a year.

Fannie Mae: Borrowers can obtain loans for up to $417,000. People who lost a house to foreclosure must wait seven years to qualify and put 10 percent down, unless there was a special circumstance. Former homeowners who completed short sales have to wait two years and have a 20 percent down payment or four years and a 10 percent down payment.

Freddie Mac: Borrowers can take out loans for up to $417,000. Borrowers with a foreclosure on their record must wait seven years unless there's a special circumstance, and then the wait is three years. People who went through a short sale must wait four years.

Veterans Administration: These mortgages have the biggest limit, $1 million. Borrowers with a foreclosure only have to wait two years and don't need a down payment if the mortgage is less than $417,000. Eligible veterans who have done a short sale may not even have to wait to take out a VA- backed loan.

In order to put these requirements in perspective, let’s take a look at new home financing from 2012 forward. In 2012, when cash buyers/investors played a more significant role in our market, only 55% of home purchases were financed, while in 2013 this number rose to 65%. Thus far in 2014, 67% of the homes purchased have been financed. The percentage of loans based on the above-mentioned scenarios have stayed fairly consistent, with Freddie Mac and Fannie Mae accounting for 56% of home purchases financed, 28% obtained FHA financing and VA loans accounted for 6%. All other forms of purchase financing accounted for 10%, and each of these other types individually were less than the 6% VA figure. Examples of other types of financing would be seller carry-backs, private loans,  jumbo loans, or loans from companies specializing in “hard money.”

Reviewing the requirements listed above, the VA is the most boomerang buyer friendly but as we can see from the loans being made, they account for the smallest volume of new home purchases. FHA is the second most friendly but they finance slightly more than 1 out of every 4 homes purchased with financing. The largest majority of buyers financing a home purchase obtain either a Fannie Mae or Freddie Mac loan.  The largest majority of boomerang buyers will be able to return, seven years after a foreclosure and four years after a short sale. Under normal circumstances after 4 to 7 years a home owner would be able to use their existing equity towards the down payment of their next purchase, boomerang buyers have no such luxury and most likely the biggest obstacle they will face will be accumulating the 10% down payment. The two charts below will show the potential magnitude of boomerang buyers in Maricopa County: