Low inventory held back SLO County’s housing market in June. Is hope on the horizon?

Low inventory held back San Luis Obispo County’s housing market in June as real estate prices evened out following several months of turbulence, according to the California Association of Realtors’ June home sales and price report

In April, mortgage rates spiked as housing inventory evaporated, and in May, median home prices dipped as active listings grew.

The conditions that kept sales low persisted as the summer got underway, South County Realtor Barry Brown told The Tribune.

High interest rates continue to keep prospective sellers from foraying into the housing market, Brown said.

Rates began rising from around 3% in January 2022, eventually peaking Nov. 10 at 7.08%. As of June 13, 30-year fixed-rate mortgages reached 6.96, nearing their previous peak, according to home buying corporation Freddie Mac.

“After being at those (low) rates for so many years, it actually caused a lot of shock from people, as well as a hope that it was just something temporary, and that things would return to what had been normal,” Brown said. “I think we’re beginning to see that people are realizing that the higher interest rates is more of a new normal.”

Home sales slow in SLO County

Across California, low inventory and high interest rates continue to hold home sales down, the California Association of Realtors report found.

Sales of existing single-family homes totaled 277,490 in June, falling 4.1% compared to May, the report said. That was 19.7% less than in June 2022.

Median home prices inched upwards by 0.3% across the state in June, reaching $838,260, though that figure was 2.4% lower than June 2022, the report said.

Though most regions in California saw their housing markets stagnate, the Central Coast region — which encompasses San Luis Obispo, Santa Barbara, Monterey and Santa Cruz counties — experienced the smallest home sales decline relative to the other four main regions of the state.

Year-over-year, housing sales declined 18.6% on the Central Coast, the CAR report found.

The Central Coast region was also the only major region to register a median price increase compared to the previous year thanks to strong sales in Santa Barbara and Santa Cruz Counties, which had highest median prices in the region, the report said.

In San Luis Obispo County, median sale price decreased 1.1% from May and 4.4% from June 2022 to $865,000.

The county’s 313 listings were suppressed by 21.8% from this time last year, and the 184 homes sold were 23.7% fewer than June 2022.

Just three cities — Nipomo, Grover Beach and Paso Robles — saw home sales grow year-over-year.

Paso Robles housing prices hold steady

According to the CAR report, the city of San Luis Obispo experienced drops in median price, sales and listings compared to the previous year, with median price dropping 6.7% to $1.12 million.

Year-over-year, listings declined 6.1% to 31, while sales fell 16.2% to 31 in June.

Paso Robles saw the most home sales of any San Luis Obispo County city as sales grew 18.2% year-over-year to 52 sales in June, the report said. New listings were similarly strong, growing 13.2% year-over-year to 59 in June.

Home prices in Paso Robles remained the least expensive in the county, with median price falling 4% from June 2022 to $685,000.

Atascadero featured the second lowest median price in the county, declining 17.3% from the previous year to $705,000.

The North County city also saw the second-largest year-over-year drop in sales, plummeting 44.4% to just 20 sales despite a 10.8% increase in listings to 33 in June.

Nearby, Templeton sported the highest median price and largest increase in median price in the county, reaching $1.5 million after a 53.1% year-over-year increase.

The 13 listings in Templeton fell short of the previous year by 18.8%, and the seven homes sold were further depressed by 36.4%.

Along the northern coast of the county, prices changed little, though listings and sales varied heavily city to city.

Cambria’s median price of $1.07 million was 0.6% higher than in June 2022. The town also saw 19 active listings — 5% fewer than June 2022 — and 11 homes sold, which was 8.3% lower than the previous year.

Morro Bay home prices increased 8.2% year-over-year to $1.08 million, and listings jumped 100% from June 2022 to 18 last month.

Home sales in Morro Bay declined 30.8% to nine in June, the report found.

Nearby, Los Osos saw median home prices decline 4.8% year-over-year to $810,000 in June.

Los Osos experienced the largest drop in listings of any city in the county, falling 66.7% to five listings last month, while sales declined by 7.7% to 12.

Pismo Beach listings climb, sales drop

In South County, Pismo Beach’s median home price grew 5.7% from June 2022 to $1.48 million.

While listings climbed 30.8% to 17, sales dropped 40% year-over-year to nine in June.

Arroyo Grande median prices reached $1.1 million, declining just 0.1% from last year.

Listings fell 13.5% year-over-year to 32 last month, and sales fell by 29.6% to 19 in Arroyo Grande.

Nipomo median sale prices grew 12.7% year-over-year to $983,000 in June. The city’s 19 listings in June were 29.6% lower than June 2022, though sales grew 50% to 24.

Grover Beach’s median home price of $752,000 was the lowest in the county, and was 14.6% lower than in June 2022.

However, just five homes were listed — tied with Los Osos for least in the county — representing a 58.3% decline year-over-year. Twelve homes were sold in Grover Beach, 33.3% more year-over-year than June 2022.

Inventory shortage hurts real estate market

Lindsey Harn, a San Luis Obispo Realtor with Christie’s International Real Estate Sereno, said this new market will experience less volatility at the expense of housing affordability.

As was the case in recent months, the buyers who have the money can continue to pay the premium for the homes they want, but more buyers won’t be able to make purchases pencil out if rates stay high and inventory stays low, Harn said.

“Even though more homes are coming on the market each week, they’re getting absorbed by buyers,” Harn said. “We’re still in a very low inventory market, which keeps prices high, and it keeps the days on market short.”

On the bright side, Harn said, there may be hope on the horizon this fall as competitiveness declines with the arrival of the school year.

While San Luis Obispo County doesn’t experience the same level of seasonal change as regions with well-defined winters and summers, Brown said seasonal change can impact the real estate market.

Though the summer should be a popular time for home sales and purchases as families try to move between school years and the cold season, continued lack of inventory has tamped down the usual frenzy of transactions, Brown said.

“(In June) it seemed like we were getting some inventory, but at the same token, we just didn’t have a lot of velocity,” Brown said. “It was nowhere what June was the prior year, and maybe was even a little lackluster, compared to May.”

That’s a problem that’s unlikely to resolve itself in coming months, Brown said.

The low inventory is ultimately a symptom of 2022’s “unsustainable, red hot market” that saw inventory get snapped up as buyers looked to buy before rising interest rates and decreasing inventory priced them out, Brown said.

“Generally, the only way you can come off of that is with a market correction,” Brown said. “I think where we’re at now is a little bit more of — and I hate to use the phrase — but it’s a soft landing, more of a normalized market.”