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David Kim: Housing Market Snapshot: High Buyer Demand, Low Inventory

Data has shown existing sales in July went under contract in fewer than 30 days for the fourth consecutive month due to higher buyer demand, but existing home sales ultimately pulled back as large declines in the Northeast and Midwest outweighed sales increases in the South and West, according to the National Association of Realtors (NAR).

Lawrence Yun, NAR chief economist, says the second half of the year got off on a somewhat sour note as existing sales in July inched backward.

“Buyer interest in most of the country has held up strongly this summer and homes are selling fast, but the negative effect of not enough inventory to choose from and its pressure on overall affordability put the brakes on what should’ve been a higher sales pace,” Yun said.

“Contract activity has mostly trended downward since February and ultimately put a large dent on closings last month,” he said.

The median existing-home price for all housing types in July was $258,300, up 6.2 percent from July 2016 ($243,200). July’s price increase marks the 65th straight month of year-over-year gains.

Total housing inventory at the end of July declined 1.0 percent to 1.92 million existing homes available for sale, and is now 9.0 percent lower than a year ago (2.11 million) and has fallen year-over-year for 26 consecutive months.

Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.8 months a year ago.

“Home prices are still rising above incomes and way too fast in many markets,” Yun said. “Realtors continue to say prospective buyers are frustrated by how quickly prices are rising for the minimal selection of homes that fit buyers’ budget and wish list.”

Properties typically stayed on the market for 30 days in July, which is up from 28 days in June but down from 36 days a year ago. Fifty-one percent of homes sold in July were on the market for less than a month.

First-time buyers made up 33 percent of sales in July, which is up from 32 percent both in June and a year ago.

According to president William E. Brown, a Realtor from Alamo, Calif., there’s a prominent misconception — especially among non-homeowners — that a down payment of at least 20 percent is needed to buy a home.

“Every month this year, roughly 60 percent of buyers who financed their purchase with a mortgage made a down payment that was 6 percent or less,” he said. “Potential buyers with solid employment and manageable levels of debt will find that there are mortgage options available.

"Talk to a lender to find out what you qualify for based on your savings and let that guide you as you begin your home search with a Realtor,” he said.

— David Kim is a licensed real estate broker with Village Properties and the 2017 president of the Santa Barbara Association of Realtors. Contact him at [email protected] or 805-296-0662. The opinions expressed are his own.

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