Owners of formally distressed homes may never return to the housing market, according to a report from Sterne Agee Chief Economist Lindsey Piegza.
The Sterne Agee report cites a study released recently by the National Association of Realtors that found that only one in three owners of formerly distressed homes have returned or plan on returning to the housing market.
Distressed homes include both those that have been foreclosed or sold at a loss (often sizable) relative to the purchase price.
Nearly 9.3 million Americans lost their homes during the financial crisis, and eight years later, only 1.3 million have tried getting back into the world of housing. And according to NAR, only 1.8 million more will jump back into the housing market over the next decade.
Piegza cited two big reasons for why many previous homeowners are reluctant to reenter the housing market: the emotional and financial strain.
However, even if some do choose to jump into the housing market, they are limited because of tight credit standards.
“Not only do owners of formerly distressed homes have damaged credit for an extended time, but to purchase again, mortgages must now be obtained amidst an abundance of new, more stringent credit restrictions,” said Piegza.
NAR estimated that since 2009, 4 million potential homebuyers have been unable to purchase a home because they didn’t qualify for a mortgage.
In addition to this, Piegza noted that the continued decline in the homeownership rate to 64%, the lowest rate in two decades, reflects in part the restraint of tighter credit standards for all buyers.