Halfway through 2024, SLO County’s housing market has improved in one area. Here’s how

After three tumultuous years, the San Luis Obispo County housing market appears to have leveled off at a spot that is out of reach for most buyers — but hope may lie in the end of one of the market’s most interesting trends.

In the first half of 2024, home prices and interest rates maintained their significantly elevated position from the end of 2023, keeping many would-be buyers out of the market and making homeownership a difficult prospect for many.

However, San Luis Obispo Realtor Lindsey Harn said there are reasons to believe the Central Coast’s tight inventory may be expanding as some pandemic-era buyers that were able to capitalize on low interest rates and a high up-front payment start to list homes that they no longer have a use for.

“I just got a call from someone last week who (was) like, ‘We don’t have to sell, but we’re getting down here once every three months,’ and it just doesn’t justify having the property if they’ve got to be back in the office three to four days a week from Santa Fe,” Harn said.

While San Luis Obispo County will continue to be an attractive location for potential homebuyers with enough money looking to move to a beautiful location, the pandemic-era momentum has officially worn off, Harn said.

“Some of the people that did come are exiting because they’ve got to be in the office three or four days a week,” Harn said. “In COVID, living in Los Osos was great, but if you have to be in the Bay Area four days a week for work, you’re just not using it.”

Will SLO County housing market continue to stagnate?

Over the first six months of the year, interest rates in particular have not come down much from where they peaked in October at 7.79% — the highest interest rate since the 2008 recession, according to mortgage lender Freddie Mac .

Harn said many Realtors and prospective buyers expected rates to decline more over the course of the year. Last fall, she said high mortgage rates contributed to one of the “slowest Novembers” for sales of her career.

Since then, interest rates have dropped to 6.77% as of July 18 after dipping as low as 6.6% this year in January — but mostly have hovered in the high 6% to low 7% range, keeping prices inflated and inventory tight when homes hit the market.

In June, San Luis Obispo County’s median home price hit $890,000 — a modest 2.9% increase over the same month last year, according to the California Association of Realtors’ monthly housing market report.

A total of 190 homes were sold in San Luis Obispo County last month — just 3.3% more than June of 2023. However, those sales came from a pool of 415 active listings, representing a 32.6% jump in inventory from last year.

Critical lack of inventory at all but the higher-end market became the standard in San Luis Obispo County’s housing market and contributed to median prices plateauing at an often unattainable level through 2023 and 2024, Harn said.

Statewide median home prices were 7.5% higher than the $837,850 recorded in June 2023 during the third consecutive month of prices over $900,000, according to the CAR report.

“In SLO city last year, we were at about $1.08 million, and now we’re at $1.267. So overall, county prices have averaged pretty flat, but certain more desirable markets have increased significantly,” Harn said. “I think the baseline of the average starter home has gone up significantly, and then we’ve also seen an increase in higher-end products.”

Sales starting to slow while inventory increases

Across the Golden State, the volume of sales has started to slow down, according to the CAR report.

Sales have stayed more stable in San Luis Obispo County than its northern and southern neighbors, growing by 3.3% from both last month and last June while Monterey and Santa Barbara counties have both taken steps back from last month’s sales.

As Harn said, sales have started to slow somewhat in most San Luis Obispo County markets, with major markets staying steady, according to the CAR data.

The city of San Luis Obispo and its 43 listed homes benefited from increased inventory, with 79.2% more homes for sale last month than this time last year.

That helped San Luis Obispo’s sales, which totaled 29 in June, and resulted in a 9.8% decline in the median price from this time last year, reaching $1.1 million.

Paso Robles saw a 38.9% increase in inventory year-over-year to 75 last month, but sales dropped by 8.3% over that time frame to 33. Median prices rose by 20.4% to $800,000 in Paso Robles in June.

Atascadero’s inventory was relatively similar year-over-year at 31, but sales increased by 15% to 23 in June, with the median price similarly holding around level at $718,000.

Pismo Beach’s inventory spiked by 88.2% year-over-year to 32 listings in June, with nine home sales and a county-high median price of $1.62 million — an increase of 23.6% over that time.

Templeton similarly saw a 68.8% increase in inventory in June, with 27 listings, eight sales and a 66.1% increase in the median price, which reached $1.29 million.

In Morro Bay, Nipomo, Los Osos and Grover Beach, active listings and sales increased while median prices declined slightly from last year to varying degrees.

Will market improve in late 2024?

California Coast Real Estate Realtor Graham Updegrove said the San Luis Obispo County housing market has stayed relatively strong with more inventory on hand, but he said the decline in sales is “a bit surprising for the middle of summer.”

“That being said, the number of homes for sale countywide is up approximately 13% from a year ago, though still roughly half of pre-pandemic inventory figures,” Updegrove said.

New construction sales in San Luis Obispo through Avila Ranch and San Luis Ranch are helping keep inventory moving, but sales won’t really pick up momentum until interest rates get into the high 4% range, Updegrove said.

Both Harn and Updegrove said while that probably won’t happen until early 2025 at the soonest, San Luis Obispo County’s desirable market will keep sales steadier than other markets that could see sales slow down.

Interest rates aren’t likely to get under 5% by the end of 2024, meaning many potential buyers will still refrain from purchasing a home until their mortgage is more affordable, Harn said.

“My guess is that the number of transactions will slow down — right now we’re trending ahead of last year,” Harn said. “I would anticipate we’ll sort of end up around where last year’s numbers (were) because I do think purchases will slow down right before and after the election, as we see every election year.”