SLO County’s housing market is off to a hot start in 2024. Is it a sign of things to come?

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San Luis Obispo County’s housing market finally showed signs of life in the first month of 2024 as a softening in mortgage rates eased pressure on buyers.

Across California, home prices decreased and sales rose as interest rates continued to sink, ending a six-month sales skid, according to the California Association of Realtors’ monthly housing market report.

After around four months of 30-year fixed-rate mortgage rates above 7% and sluggish market growth, the housing market enjoyed rates as low as 6.6% in January, a far cry from Oct. 26, 2023’s historic peak of 7.79%.

Ryan Kotschedoff, a Realtor with San Luis Obispo-based real estate company Eighty20 Group, said while rates are still quite high for many buyers, the stability near 6.5% has eased concerns for some buyers holding out for better rates.

“Not to say that they dropped drastically or anything like that, but I do think just the fact that they started to finally come down even just a little bit, brought a lot of comfort to homebuyers,” Kotschedoff told The Tribune. “It was at 8% at one point, and that started to come down into the sevens and high sixes — which to a lot of people, a high interest rate — but I definitely think the news and rumors that it was gonna keep decreasing brought a lot of buyers back into the market.”

Here’s why San Luis Obispo County Realtors are feeling better about the market in 2024 than they did late last year — and what advice they have for prospective buyers.

2024 opens to rising California sales figures

Though compared to January 2023, sales numbers were down 5.9% across California in January, statewide home sales were up 14.4% from December 2023, when 224,000 homes were sold.

In January, 256,160 homes were sold, marking the first improvement in sales compared to the previous year in 31 months, the CAR report found.

However, while sales figures are expected to improve over the coming months, they’re also expected to stay below 300,000 a month through the first quarter of 2024, the CAR report said.

Brown said normally, the market would see closer to 400,000 transactions a year, but since the pandemic-era buying frenzy, statewide sales have yet to regain that pace due to the vacuum in inventory.

He said while there are other market forces that ultimately motivate whether sales will rise or fall, interest rates still reign supreme.

In his own experience as a homeowner, Brown said he could recall “jumping for joy” when he and his wife were able to refinance his own mortgage in the 1980s from 17% down to 13%.

He said it was important to remember that in the eyes of buyers and sellers, hesitancy over interest rates is strictly relative to what the market at the time can stomach.

“With home buyers, it all boils down to a monthly payment,” Brown said.

The holiday season’s typical slowdown in transactions aside, growth in sales should be expected for the foreseeable future so long as interest rates continue to be manageable to buyers, Kotschedoff said.

Lower interest rates may mean active listings will increase in coming months as potential sellers who waited out the peak of rates place their homes on the market, with fewer concerns about moving on from the favorable rate they had locked in — potentially starting to break up the log jam of locked-in rates, Kotschedoff said.

Home prices decline as sales improve across SLO County

San Luis Obispo County’s median home price reached $910,000, up 14.4% from the previous year, but 4.8% lower than December 2023.

Even with listings down by 2.8% compared to last January, sales improved by 28.7% over that time to 121 last month.

Nearby, Santa Barbara County posted a significant increase in median price, jumping 43.8% year-over-year and 7.5% from last month to reach $1.28 million in January.

With 279 listings — 31.6% more than January 2023 — and 116 sales, the county saw 1.8% more transactions in last month compared to the previous January.

Monterey County experienced a far milder January, with prices declining to $825,000, as they fell 2.9% year-over-year and 11.2% month-over-month.

Monterey County also saw far fewer listings with 244 — 6.2% fewer than the previous year — and 93 sales. That was down 4.1% year-over-year.

Much of San Luis Obispo County’s strong sales showing can be attributed to above-average sales in cities such as Nipomo, Paso Robles, San Luis Obispo and Arroyo Grande, with several other communities also performing better than they did in January 2023.

In San Luis Obispo, home prices again were the highest in the county in January as prices rose 25% year-over-year and fell 1.7% from last month to $1.13 million.

That price was driven by 26 sales — an 85.7% improvement on January 2023 — and 35 listings, which grew by 6.1% over that time.

As usual, Paso Robles was the least expensive place to live in San Luis Obispo County, with a median home price of $705,000. That rose 24.8% from January 2023, but only 3.2% in the past month.

Paso Robles was also home to 63 listings last month — 14.5% more than last January — and saw 22 transactions, representing a 22.2% year-over-year increase.

In South County, Nipomo posted 13 sales, or a 160% increase from January 2023, based on 17 listings — 10.5% fewer over that time.

Median price reached $960,000 in Nipomo last month, which was 1.6% higher year-over-year and 9.4% higher than in December.

Meanwhile, many San Luis Obispo County markets including Cambria, Grover Beach, Los Osos, Morro Bay, Templeton and Pismo Beach all failed to register more than 10 sales.

Housing affordability remains historically low

Despite recent improvements in interest rates and sales figures, housing affordability continued to be a source of pain for many residents of the Central Coast, with San Luis Obispo County taking home the dubious honor of being named the third least-affordable county in California.

Just 8% of San Luis Obispo County residents can afford the down payment on a median-priced home in the county, requiring a minimum income of $242,800, CAR’s fourth quarter housing affordability report found.

Only Mono County — in which just 5% of residents could afford a home — and Monterey County’s 8% affordability rate ranked lower than San Luis Obispo County, the report showed.

Housing affordability has trended downward in San Luis Obispo County significantly in recent years, falling 10% since the first quarter of 2022.

Both Kotschedoff and Brown attributed the past two years of affordability struggles to the perpetual lack of large-scale development in the county.

That limited pipeline of new homes was exacerbated by the frenzied post-pandemic years, Brown said, particularly before interest rates crossed the 4% threshold.

Brown said while recent declines in home prices and improvements in sales figures are a good sign, ultimately the market can only go as far as interest rates allow.

With the market “coming out of hibernation,” Brown said he expects the U.S. Federal Reserve to closely watch the market and set interest rates accordingly.

Kotschedoff similarly said continuing declines in interest rates will likely dictate what’s available for buyers looking to get into this less-hostile market.

“I think the inventory issue is starting to solve itself just a bit — not completely solved, that’s for sure — but I think there is confidence in the real estate market,” Kotschedoff said. “People have more equity in their homes than ever before.”