NEW YORK–The millions of Americans who lost their homes to foreclosures or short sales during the housing crisis are now returning to the economy and even the housing market.
A report by Bloomberg noted that the number of people joining the rolls of those knocked from homeownership peaked seven years ago, “so those blotches to their histories are starting to roll off the books right about now. The resulting improvement in credit scores means more Americans will find themselves with the ability and means to once again apply for loans, and not just for home purchases.”
“Improving credit scores might entice households to start borrowing more in general,” Ralph McLaughlin, chief economist at real estate search engine Trulia, told Bloobmerg. “And what better time than now, when interest rates are so low.”
Bloomberg noted that combined with sustained gains in employment and bigger increases in pay, consumer spending, which accounts for almost 70% of the U.S. economy, could provide an added lift over the next couple of years. The impact, though, is hard to quantify because it’s difficult to estimate how many people will once again be emboldened to borrow after experiencing such a shock, Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York, told Bloomberg.
The number of consumers with a new foreclosure added to their credit reports peaked at about 566,000 in the second quarter of 2009, according to data from the Federal Reserve Bank of New York. In the four years through 2010, that group totaled 6.8 million, Bloomberg noted.
The report also cited a 2015 TransUnion study that estimated that of the approximately seven-million consumers who were negatively impacted as the housing bubble burst – including those who were either severely delinquent on their mortgages, negotiated a short sale or went into foreclosure – only 1.2 million had recovered enough by December 2014 to meet Fannie Mae selling guidelines.
Based on their credit histories, the agency estimated that 2.2 million more could meet those criteria through 2019, Bloomberg added.