Distressed Sales Reach Record Low
Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand. Some markets reported slower foot traffic in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains.
Total housing inventory declined 0.4% to 2.24 million existing homes available for sale, and is now 4.75 lower than a year ago. Unsold inventory is at a 4.8-month supply at the current sales pace, down from 4.9 months the month before.
The percent share of first-time buyers declined in for the second consecutive month, falling 2% to 28% - the lowest share since January of this year. A year ago, first-time buyers represented 29% of all buyers.
The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face. Rising rents and flat wage growth make it difficult for many to save for a down payment, and the dearth of supply in affordable price ranges is limiting their options.
Properties typically stayed on the market for 42-days, an increase from 34-days but below the 48-days in July 2014. Short sales were on the market the longest at a median of 135-days while foreclosures sold in 49-days and non-distressed homes took 41-days. Forty-three percent of homes sold were on the market for less than a month.
All-cash sales increased slightly to 23% of transactions but are down from 29% a year ago. Individual investors, who account for many cash sales, purchased 135 of homes in July, up from 12% but down from 16% in July 2014. Sixty-four percent of investors paid cash last month.
Representing the lowest share since tracking began in October 2008, distressed sales declined to 7%; they were 9 percent a year ago. Five percent of sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 17% below market value while short sales were discounted 12%.
The housing market is in a much better place and has come a long way since the depths of the recession. Five years ago, distressed sales represented 33% of the market. For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments.