After foreclosure, former home buyers back in the market

  • Article by: JIM BUCHTA , Star Tribune
  • Updated: August 4, 2013 - 4:35 PM

More people who lost their home during the darkest days of the recession are doing what might have been unthinkable just a few years ago: They’re becoming homeowners again.

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Realtor Cheryl Kempenich showed a home in Shoreview to her brother-in-law Jerry Kempenich and his wife, Jennifer, while their son, Henry, 8, returned from exploring the back yard of the home.

Photo: JEFF WHEELER • jeff.wheeler@startribune.com,

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 More people who lost their home during the darkest days of the recession are doing what might have been unthinkable just a few years ago: They’re becoming homeowners again.

“Boomerang buyers” — former homeowners who have gone through a foreclosure, short sale or bankruptcy — are restoring their credit ratings, getting mortgage approval and hitting the streets in pursuit of homeownership in Minnesota and across the country.

Already, one in 10 home buyers this year has gone through a foreclosure or short sale, more than double the rate in 2012, according to John Burns, a national research firm on the housing industry. Boomerang buyers are emerging at even greater numbers in communities hardest-hit by the housing collapse, including Phoenix, where one in five sales will involve a buyer who had to give up his home.

“People are starting to find out that they can get back into homeownership, and they’re rebuilding their life, credit and equity,” said Rebecca Brown, an agent for Re/Max Results in Maple Grove.

Some boomerang buyers say they are emboldened by an improving economy, punctuated by a steady climb in home sales and prices. In Minnesota, where more than 150,000 homes fell into foreclosure from 2005 to 2012, personal incomes are holding steady, and the state has recovered most of the jobs lost during the ­economic ­downturn.

“As we slowly recover from this crisis, we’re certainly seeing a resurgence,” said Ed Nelson, spokesman for the Minnesota Homeownership Center, which offers guidance to home buyers.

Jennifer Piper and Jerry Kempenich, for example, lost their St. Paul home in foreclosure after Kempenich was twice laid off, and they were unable to sell the house, which was worth $100,000 less than they paid.

Though the couple kept current on their bills, they believed their days of homeownership were over.

“We thought [that] from now on we’re going to be renters and paying someone else’s mortgage,” Piper said.

For three years, they have been pinching pennies and cutting back on vacations. Their jobs are stable, and they have saved enough money for a substantial down payment. That led to the couple getting preapproved for an FHA mortgage.

“It astounded me that we were eligible,” Piper said, noting that she and her husband are eager to buy now.

Mortgage rates have been on the rise, and the mortgage insurance deduction expires at the end of the year.

“There is a time crunch,” Piper said. The positive momentum in the housing market comes at a time when nearly one in five homeowners remain underwater on their mortgage. And while the foreclosure rate is declining, more than 16,000 Minnesotans received a preforeclosure notice during the first six months of the year.

“While we’re certainly moving in the right direction, we can’t lose sight of the fact that the number [of foreclosures] is still three times higher than it was before the crisis began,” said Julie Gugin, executive director of the Minnesota Homeownership Center.

Waiting game

Real estate agents see boomerang buyers as an expanding, untapped market that is motivated to regain what was lost and often better qualified because of what they have learned when they lost their homes.

Chris Fellerman, an agent for Edina Realty, said 10 to 15 percent of his current buyer pool has been through some serious financial hardship, including foreclosure. “It’s a vibrant sector of the market today,” he said.

The recession devastated homeownership across wide swathes of the country, as millions of homeowners had no choice but to give up their homes and move into the basements and guest rooms of friends and relatives. The homeownership rate across the United States plummeted to 65.1 percent, the lowest since 1995.

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