San Luis Obispo County home prices continue to rise, the result of a stronger economy and intense competition over a low supply of available homes. These are favorable market conditions for sellers, but they present numerous challenges for first-time homebuyers.
The county median home price — the midpoint at which half of the houses sold for more and half for less — was $473,500 in February, according to the latest available figures from CoreLogic, an Irvine-based data company. That’s up 5.5 percent over the previous year.
Resale single-family detached homes sold at a median price of $488,750, up 8.9 percent. The median price for condos was $370,000, down 0.7 percent. And the median price for new homes was $553,500, up 7.8 percent year-over-year.
The largest median price increase was for new homes. That number was $629,750, up 31.2 percent year-over-year.
The total number of units sold in the county was 268, up 1.5 percent from a year ago. A total of 183 of those sales were of detached resale homes, a 16.1 percent decrease from last February. Thirty-seven condos sold, an increase of 42.3 percent. New home sales were up 140 percent, which amounts to 48 units sold in February, compared with 20 in the previous year.
The jump in new home sales is the result of a few new housing developments coming online, explained Tim Townley, owner/broker for Comet Realty in San Luis Obispo and president of the San Luis Obispo Association of Realtors. This includes the Serra Meadows housing development and Avivo Townhomes in San Luis Obispo.
Townley attributes the slowdown in sales of existing homes to a lack of inventory. He noted that, in the city of San Luis Obispo, there is 2.6 months of inventory, which is down 7.1 percent from last year.
“A healthy market is closer to six months,” he said, adding that the median time that homes in San Luis Obispo are spending on the market is 48 days — far less than the typical 90 days of a normal market.
Realtors in other parts of the county are also reporting shortages in the number of available homes.
Vicki Silva, broker associate with RE/MAX Parkside in Paso Robles, said that, as of March, inventory in Paso Robles was down more than 18 percent from last year.
In contrast, Gary Gracia, broker associate with Central Coast Realty Group in Arroyo Grande, noted that inventory in South San Luis Obispo County is only down about 1 percent year-over-year, which amounts to about three houses.
Because of this competitive market, the rise in home prices is not likely to stall anytime soon, said Christopher Thornberg, founding partner of Beacon Economics, a firm that conducts real estate market analysis.
“We have an improving economy, people’s income is starting to increase, the population is growing again — the result is assuredly a market that will see price increases,” he said.
This is good news for sellers. However, “the downside is stress on lower-income households” that may soon find themselves priced out of the housing market, Thornberg said.
Making things even more challenging for potential first-time homebuyers is a significant shortage of lower-priced starter homes.
We have an improving economy, people’s income is starting to increase, the population is growing again — the result is assuredly a market that will see price increases.
Christopher Thornberg, founding partner of
Larry Smyth, owner/broker of Farrell Smyth Real Estate in San Luis Obispo and Arroyo Grande, observed that because the economy has been slow to turn around, “people are reluctant to make the move up from starter to the next level.”
But the news isn’t all bad for first-time homebuyers.
RE/MAX’s Silva pointed out that home prices are “still well below the high market prices of 2006 and 2007.” She also believes that inventory levels might get a boost in spring and summer, when homeowners waiting for the right time to sell may make their move, anticipating the busiest time of the year for home sales.
Smyth said that there are “quite a few new housing projects on the books and some selling now — more than there’s been in a long time,” which may increase inventory and potentially be a “good thing for first-time homebuyers.”
Although the Federal Reserve raised its benchmark interest rate last December, which influences mortgage rates, Smyth predicts that mortgage interest rates will not see significant increases until the first quarter of 2017, when they may hover around 4.5 percent. As of mid-April, they were about 3.5 percent.
New homebuyers may also find it easier to get a loan.
Credit markets are finally beginning to loosen up after the subprime mortgage crisis of nearly a decade ago, Thornberg said.
“A couple years ago, unless you had a solid W-2 and a spotless credit record, you wouldn’t qualify for a loan,” he said. As the economy improves, home prices rise and equity begins to build, he added, lenders are “more comfortable making loans in this environment.”
Still, Townley advised potential homebuyers to keep a close eye on credit scores.
“Don’t make any other big purchases, or change jobs — these things can have an adverse effect on your credit,” he said.
In a seller’s market, he noted, it pays to be prepared — which includes getting prequalified for a loan. “The first-time buyer really has to be ready to pounce.”