JOHN LYNCH, JANUARY 30, 2024
San Luis Obispo County and the rest of the Golden State’s housing market recorded one of its worst years on record in recent memory in 2023 as buyers felt the continued effects of high interest rates, high prices and little availability in December.
According to the California Association of Realtors’ monthly home sales and price report, after home sales reached a 16-year low in November, 224,000 units were sold in December — “essentially unchanged” from the historic low.
Though the market pressures keeping housing unaffordable to many Californians were different in 2023 from the skyrocketing prices and frenzied purchasing that defined 2021 and 2022, the end result was still largely the same, local experts said.
San Luis Obispo Realtor Graham Updegrove said as 2024 gets underway, the market is likely to trend in a healthier overall direction, though it may be slow going.
Mortgage rates continued to decline, reaching their lowest rate since August last year at 5.93% as of Dec. 28, and have stayed lower than 6% in the following weeks, according to home mortgage lender Freddie Mac.
Despite a recent bump in mortgage rates in recent weeks, “inflation is expected to continue subsiding with an expectation of rates coming down into the mid to high 5’s by end of year,” Updegrove said.
“Throughout the year, I’m expecting rates to range between 5.5% and 6.5% depending on economic factors,” he said, “and the drop from about 8% to about 6.5% in just a few months is quite quick.”
HOUSING ARKET TO PICK UP STEAM EARLY IN 2024
While 2023 will go down as one of the California housing market’s least affordable years on record, San Luis Obispo-based Realtor Lindsey Harn shared some of Updegrove’s optimism.
Harn said the most recent declines in interest rates suggest rates will continue to soften over the next one to three months.
“I am already feeling a change in pace from 2023, as we are now three weeks into 2024,” Harn said. “The sticker shock of high rates and high prices have subsided, and I think many buyers fear if they continue waiting out the rates, they will simply be priced out of the market.”
In 2023, 24.8% fewer homes were sold in California than in 2022 — the largest single-year decline in home sales since 2007, the report found.
Home prices across the Golden State fell 0.3% from November, ending December at $819,740 — 6.4% higher than December 2022.
Updegrove said San Luis Obispo County’s market was no exception to that trend, estimating a 20% decline in sales compared to 2022.
Though far less frenzied than the proceeding two years, 2023’s housing market was still “busier than expected,” Updegrove said.
Many of the year’s more active months for home sales fell during spring and early summer, when interest rates appeared to temporarily be on the decline in the months following the Nov. 10, 2022, peak of 7.08%, according to CAR data.
As rates continued to fluctuate north of 6% over the course of the year, several Realtors including Harn and Updegrove noted on multiple occasions that the market had given existing homeowners few reasons to move on from their homes.
That meant fewer homes were coming on the market, which would further limit the available stock of inventory, Harn said after housing affordability hit a 16-year low last year.
It also meant homes were only selling to more competitive, higher-income buyers who could stomach high interest payments, Harn said in November.
“There’s a big disconnect on what people earn here and the cost of housing,” Harn said at the time. “That entices a lot of investors, a lot of people buying second homes, but for the people living here, rolling up their sleeves every day, it’s really difficult.”
‘SLUGGISH’ MARKET DEFINES LATTER HALF OF 2023
Home sales and prices around the Central Coast maintained many of the trends of late 2023 as buyers pumped the breaks around the holidays.
San Luis Obispo County ended 2023 with a median home price of $956,000 — 6.8% higher than the previous month and 15.2% higher than December 2022, CAR data showed.
Home sales slipped minimally from the previous month, with 132 transactions recorded from 302 available listings.
County-wide, sales ended December 2.2% lower than in 2022, even with the number of listings growing 5.2% year-over-year.
“Winter tends to be a slow time for sales activity and with such limited inventory during 2023, it wasn’t surprising to see sluggish sale figures the last few months,” Updegrove said. “Furthermore, interest rates reaching a bout 8% in October slowed buyer activity as some buyers were plain and simple priced out of being able to afford a home.”
Prices fluctuated to the north and south of San Luis Obispo County in December, with Santa Barbara County’s median price of $1.19 million jumping 12.8% year-over-year and 32.2% from October.
Monterey County median home prices also grew 19.9% from December 2022 to $929,000, though it was 1.6% lower than the previous month.
Sales declined 4.1% year-over-year in Santa Barbara County in December, ending the year with a total of 118 homes sold last month, while Monterey County’s 103 sales last month fell by 1.6% over that time.
Santa Barbara County experienced a 36.1% spike in home listings compared to December 2022, with 275 homes available, while listings in Monterey County declined 13.9% year-over-year to 230.
Without exception, median prices were higher in December 2023 than in December 2022 in every San Luis Obispo County community tracked by CAR, though several locales notably experienced month-over-month declines in price.
Only San Luis Obispo, Templeton, Paso Robles, Morro Bay and Grover Beach registered any sales growth from December 2022, while Pismo Beach, Paso Robles, Nipomo, Cambria and Atascadero were the only areas to record growth in listings.
In San Luis Obispo, prices ended the year north of $1 million, as the median price rose 32.4% from this time last year and 1.8% from last month, reaching $1.15 million.
Just 16 homes were sold in San Luis Obispo in December — a 23.1% increase year-over-year. The number of listings fell by 24% in that same time to 25.
To the north, Atascadero’s median price reached $928,000, growing 18% from the previous year and 30.7% from November.
According to CAR data, 13 homes were sold from a pool of 39 listings in Atascadero. That represented a decline in home sales of 40.7% year-over-year — but an increase in the number of listings, jumping 62.5% compared with the previous year.
Paso Robles continued to be one of the least expensive places to live in the county, with a median price of $683,000. That was just 1.1% higher than the median price in December 2022 and 7.8% lower than the previous month.
Paso Robles also saw the most sales and listings in the county last year, recording 30 sales from 64 listings. In December, sales in the city grew 57.8% compared to the previous year, while listings grew by 12.3% over that time.
Arroyo Grande and Nipomo led South County in transactions and listings last month, according to the data.
Median prices reached $1.33 million in Arroyo Grande, rising 9.2% year-over-year and 2.3% from November.
Nipomo median prices grew 28.9% year-over-year and 33.8% from the previous month, reaching $1.06 million in December.
That month, 14 Nipomo homes were sold — which was 26.3% fewer than the same month in 2022. Meanwhile 22 homes were listed as available, a 4.8% increase.
Though several smaller municipalities saw larger price fluctuations and higher prices, this was largely caused by a low number of transactions, which can skew median price and year-over-year change data.
Smaller communities such as Cambria, Los Osos, Morro Bay, Pismo Beach and Templeton — which typically see fewer transactions and listings — ended the year with median prices in the neighborhood of $1 million dollars, but all failed to end the month with more than 10 sales.
Pismo Beach topped all San Luis Obispo County communities with a median home price of $1.58 million — 40.2% higher than December 2022 and 63.6% higher than in October — based on just four home sales and 23 listings.
2023 A CHALLENGING YEAR IN HOUSING MARKET, REALTORS SAY
In 2023, Updegrove said he was about evenly split between representing buyers and sellers in transactions, and saw firsthand some of the challenges that could stick around in 2024.
Updegrove he saw more cases of “buyer fatigue” last year, as Realtors were more likely to make multiple offers and still lose out on a home, and saw more competition for listings in general despite lackluster sales.
He said challenges related to getting homeowners’ insurance in California — which has grown more difficult in recent years due to increased wildfire risk — have also made home buying and selling more difficult, potentially introducing additional challenges down the line.
CAR’s annual housing forecast published in November predicted slower economic growth and lower inflation will continue to slow down mortgage interest rates this year, potentially creating a more favorable market, and so far those predictions have largely held true.
Though Updegrove said he had an overall optimistic view of the 2024 market, he noted that buyers in the San Luis Obispo County housing market will continue to face some of the market forces that have housing more difficult to attain since the start of the COVID-19 pandemic.
“We should see a general increase in inventory and sales figures surpassing 2023, with spring to late summer being the most active time to buy or sell,” Updegrove said. “However, that increase is not expected to be substantial, and local residents will continue to face fierce competition from cash buyers, investors and baby boomers retiring here to enjoy the ‘SLO way of life.’”