By K.J. Koljonen

Home prices in San Diego County are on the rise. That is good news for homeowners who have been waiting until the fair market value of their home increases enough to equal or exceed the amount of debt they are carrying on their property. It is bad news, however, for entry-level home buyers. Inventory of homes for sale is decreasing, yet prices are increasing. In May 2013, there were 2,988 single-family homes for sale in San Diego County. Fast forward to May 2014, when according to the San Diego Association of Realtors, inventory dropped to 879 — a 70 percent decrease.

Real estate research company recently released a report stating San Diego is the second least-affordable metropolitan area (out of 27) in the nation for purchase of a home. According to the U.S. Census Bureau, only 36 percent of Americans under the age of 35 own a home. This is the lowest level since 1982, when the agency began tracking homeownership by age. The barriers to entry for millenials vary, and include student loan debt, bad credit, lack of access to financing, and inability to save the ideal 20 percent down payment.

K.J. Koljonen, associated vice president of CHW Realty. Courtesy CHW

Combine these attention-grabbing media headlines with the low inventory of homes for sale, plus the rising cost of home values, and it’s no wonder many first-time home buyers are disillusioned.

What does this actually mean for San Diegans trying to buy a home? Are they priced out of the market? The facts of the report are true, but remember it highlights the median statistics, so there is a range that goes both above and below those numbers. Inventory is dwindling, but the good news is low-interest financing is plentiful. Favorable interest rates, under 5 percent for most buyers, mean the cost of borrowing money remains low even as housing prices have risen.

For some home buyers there is the availability of down-payment and closing-cost loans that help first-time buyers borrow the equity they need to purchase a home. CHW Lending, a nonprofit lender and a division of Community HousingWorks, or CHW, helps buyers access these programs. These loans and grants come in varying amounts and from various assistance sources. It often fills in the gap between what the borrower can borrow and the purchase price.

If you’re worried about coming up with enough down payment, CHW Lending also has a special loan product with 5 percent down payment and no mortgage insurance, available through the California Community Reinvestment Act for those purchasing homes in qualifying census tracts throughout our region. With a little bit of homework, home buyers can purchase homes in great neighborhoods within the city of San Diego — like Banker’s Hill, Clairemont, Hillcrest, North Park, Point Loma, Tierrasanta and University City. This loan is a great option for those who earn too much for down payment loans, but who may not have enough down payment saved. A couple making $100,000 recently purchased a home in central San Diego with 5 percent down and no mortgage insurance, with a very small increase in their monthly housing payment.

Homebuyers don’t need as much household income as they think to enter the market. If the household income is in the $50,000 range, you could afford to purchase a home up to about $290,000 if you have a solid credit history and qualify for a down-payment or closing-cost loan. If your household income is in the $70,000 range, you would be able to afford a home up to about $350,000.

Even if you’re not ready to go on home tours or pull the trigger to begin the loan application process, there are plenty of activities you can work on to position yourself as the best candidate to qualify for lending assistance. Now is the time to take an honest look at your finances and get your savings, credit and other debt in order. Consider taking a class or work with a coach to determine a realistic and achievable plan to increase your FICO score, pay down debt and increase savings.

Home ownership is an investment in your future and though the steps may seem daunting, it’s well worth the trouble and will pay off.

K.J. Koljonen has more than 30 years of real estate experience and is the associate vice president of CHW Realty, a division of Community HousingWorks. CHW re-invests income earned from commissions into community programs like after-school tutoring, financial literacy classes, and neighborhood revitalization. CHW reguarly schedules home-buying workshops, and the next is on Monday evening.

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