The Central Coast, consisting of San Luis Obispo, Santa Barbara, Monterey, and Santa Cruz counties, experienced an increase in median home prices last month compared to May 2022, making it the only major region in California to see growth. However, realtors have warned that the local housing market may become even tighter for buyers who are unable to pay top dollar, as inventory problems persist.
Real estate agent Graham Updegrove, based in San Luis Obispo, believes that the inventory issues will become the “new normal” in the local market due to high interest rates. Homeowners with a 3% mortgage have little incentive to move, creating a fear factor that contributes to the limited availability of homes.
Looking specifically at the Central Coast’s housing markets in May compared to other regions in California:
– Central Coast: The median price reached $1 million, showing a 0.5% increase over the course of 12 months. However, sales dropped by 17%.
– Central Valley: Experienced a decrease in the median price to $485,000, down 5%. Sales also dropped by 20%.
– Southern California: The median price dropped to $800,000, down 5%. Sales decreased by 22%.
– Bay Area: Saw a decline in the median price to $1.3 million, down 11%. Sales also dropped by 24%.
– Far North: The median price in May was $380,000, down 11% from the previous year. Sales fell by 22% in the span of 12 months.
Analyzing each county within the Central Coast:
– San Luis Obispo County: The median home price decreased by 6.1% from May 2022 to reach $875,000. Active listings fell by 13.6% compared to the previous year, but sales increased significantly from April to May.
– Monterey County: Experienced a slight decline in median home price between April and May, dropping from $953,000 to $902,000. However, home sales increased during this period.
– Santa Barbara County: Saw an increase in median price from $1.08 million in April to $1.27 million in May. Active listings remained steady, and home sales slightly increased.
– Santa Cruz County: Home sales in May showed a significant jump from April, while median home prices held steady at $1.35 million.
Realtor Lindsey Harn, based in San Luis Obispo, believes that the current market conditions are unfavorable to sellers due to high interest rates. Many current homeowners have mortgage rates lower than 6%, and the rate on a 30-year fixed-rate mortgage is currently at 6.67%. This discourages both sellers with low rates from moving and potential buyers with lower incomes from affording monthly payments on a home. The limited availability of inventory exacerbates this problem.
However, Harn mentions that there’s a chance certain buyers, particularly those with higher incomes, may still choose to buy despite the high rates, with the expectation of refinancing in the future.
Realtor Graham Updegrove believes that what was once considered unsustainable price growth no longer hinders sales, as high-income buyers can still afford the least affordable properties. He predicts that if the low inventory continues to persist, demand will remain strong, potentially attracting out-of-town buyers.
If market conditions remain stable, rates may eventually decrease. However, Updegrove anticipates that rate hikes will continue throughout 2023.
Overall, the Central Coast’s housing market is showing signs of growth in median prices. However, inventory issues, high interest rates, and the potential influx of out-of-town buyers pose challenges for both buyers and sellers.
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