Why 2025’s housing market is driving new SLO County homebuyers ‘almost extinct’
Stagnancy in the housing market appears to be the name of the game in 2025 — and San Luis Obispo County is no exception.
Since the post-COVID-19 pandemic housing boom of 2021 and 2022, the housing market has been defined by high median prices, elevated interest rates and a scarcity of listings.
The only real change of note?
Homes are taking longer to sell, and the amount of inventory is up across the county — but fewer buyers are biting, San Luis Obispo Realtor Hal Sweasey said.
In a county where homes have lasted as little as a couple weeks on the market in recent years, homes are now taking anywhere from four to six weeks to sell, signaling a hesitancy in some buyers to make potentially overvalued investments, Sweasey said.
“We are telling our sellers to treat every offer like it may be the only offer they may see for another 30 days,” Sweasey said in an email. “So well-priced, well-maintained and improved homes can sell quickly, but even those can take more of a normal 30-60 days to sell.”
Seemingly no end in sight for elevated interest rates
Going into 2025, interest rates were expected to relent somewhat.
The “lock-in effect” — a term used to describe unwillingness by buyers to give up a favorable interest rate for a higher-priced home and higher interest rate — has become a larger and larger force in the market over the past two years, as some buyers hold their breath for the highly favorable 3-4% interest rates of the early 2020s.
With 30-year fixed-rate mortgage rates stubbornly sticking to the 6% or higher range since late 2022, that means there are more houses on the market than usual — and in some locales, that’s having an impact on pricing.
Sweasey said inventory has risen “far faster” than expected, causing buyer interest to slow down in February in some of the higher-end coastal markets such as Cayucos, Morro Bay and Pismo Beach frequented by wealthier buyers interested in second homes.
That trend has spread across the county to a more noticeable extent since then, with some similar homes closing anywhere from 5-8% lower than expected, he said.
Realtor Charissa Deegan said this inventory increase has led to more urgency on the part of sellers.
Deegan said the phenomenon of homes lasting longer on the market varies by region, with pockets of communities such as Arroyo Grande and Grover Beach still holding to the old norm of homes selling within one or two weeks.
The lock-in effect is also having a distinct impact on who’s buying homes, Deegan said.
“Only 24% of home purchases in 2024 were made by first-time buyers, down from 32% the year before — the lowest share since tracking began,” Deegan said in an email. “In 2025, first time homebuyers are almost extinct.”
As a result, the average age of first-time homebuyers has risen to 38 from an average of 35 last year, indicating plenty of delayed purchases, she said.
Deegan said she doesn’t trust rates to make any significant moves as the year progresses.
“More sellers are open to incentives and other concessions,” Deegan said in an email. “The key is to ask the sellers in your offer and don’t be afraid to push on negotiations.”
Where is the SLO County housing market heading?
With interest rates holding steady in the 6.6-6.8% range since the start of July — sitting at 6.72% as of July 31, according to Freddie Mac — changes in interest rates anytime soon seem unlikely, even with the White House putting more pressure on the independent Federal Reserve to lower rates in recent weeks.
Across San Luis Obispo County, prices are generally trending up, with countywide median prices reaching $880,000 — up $10,000 from last month and down 7.6% from June 2024’s median price of $952,000, according to data from the California Association of Realtors.
According to the association, the 593 homes listed last month — 41.9% more than there were this time last year — are spending a median of 29 days on the market in San Luis Obispo County, and 47.7% of active listings are showing price reductions.
In fact, almost every municipality across San Luis Obispo County saw declines of anywhere between 40-60% in the amount of active listings that saw price reductions.
In major cities such as San Luis Obispo, home sales are down by 37.9%, while the median listed price is up 182% from this time last year at $1.3 million, according to the Realtors association.
The city of San Luis Obispo followed the county-wide trends in listings and time on the market to a T, with its 73 active listings representing a 69.8% year-over-year bump and 46.6% of active listings showing reduced prices, according to the association.
Listings similarly spiked in Paso Robles — up 84% from last year — while sales rose by 42.4% and home prices softened by just 1.4% over that same time, ending June at $789,000, according to the association.
To the south, Atascadero saw a 28.1% year-over-year price increase to $920,000, while listings rose 87.1% over that time for 58, and sales rose 8.7% with 25, according to the data. Homes in Atascadero spent a median of 48 days on the market, and 48.3% of those listings had reduced prices.
Nearby, it was a similar story in Templeton as prices declined 18.9% year-over-year to $1.04 million, listings climbed slightly by 3.7% to 28 and sales rose 25% to 10 over that time.
Grover Beach ended June as the least-expensive market in the county, with median prices rising slightly by 5.9% to $730,000, according to the Realtors association.
The city showed no change in active listings with just 12, while home sales grew by 62.5% year-over-year to 13 in June, according to the data. As Deegan said, demand remained high in June, with homes lasting a median of 17 days on the market.
Nearby, Arroyo Grande posted a median price of $1.15 million, which was 1.3% lower than this time last year, while home listings grew 30.6% over that time to 46 and home sales grew 47.1% to 25 over that time.
Pismo Beach showed the most price reductions of any city in the county, with 58.6% of listings reducing prices, according to the association. At the same time, it posted the highest median prices — $1.48 million, down about 9.2% from this time last year — while showing no change in sales with 9 and a modest decline in listings by 9.4% with 29.
Up the coast, 63.3% of Morro Bay’s 30 listings — 76.5% more than this time last year — saw price reductions, with 10 home sales representing a 42.9% boost from last year and the median price of $845,000 showing a 5.1% decline in that time, according to the data.
South of Morro Bay, median prices in Los Osos climbed slightly by 5.9% to $938,000, while listings jumped 53.3% to 23 and sales declined 20% to 12.
Farther north, Cambria’s homes stayed a median of 53 days on the market, with home prices rising just 2.9% to $800,000, sales falling 12.5% with a total of seven and listings growing 22.6% with 38. Homes stayed on the market for a median of 53 days in Cambria, according to the Realtors association.
Nipomo proved to be the hottest market in the county, with its 35 listings — down just 7.9% from this time last year — staying on the market for a median of just 17 days, according to the data. The town showed no growth in home sales with 21, while median prices declined 13% from last year with $800,000.
