High-end, million-dollar properties in San Luis Obispo County are selling much slower these days.
When the housing bubble burst and recession hit, the upper end of the real estate market slowed too as personal wealth declined, home equity dried up and credit tightened. That made it difficult for potential upper-end buyers to trade up or purchase coveted vacation homes, say those who track the real estate industry.
A total of 82 single-family homes on the market for $950,000 or more have sold in the county from Jan. 1 through Sept. 24, according to data from the Central Coast Regional Multiple Listing Service. That compares to 141 homes sold in that price range in the same period in 2008 — and 269 homes sold in that price range in the same period in 2005, considered by economists to be the peak of sales activity.
“The negotiation process is much more intensewhen it comes to higher-end properties,” said Linda Wilson, owner/broker of Wilson & Co. Sotheby’s International Realty in San Luis Obispo. “There are buyers out there, but they have a lot of choices.”
Price is critical
Such choices exist countywide. As of last week, there were 427 single-family homes in the county priced at $950,000 or more, and right now, there’s more than two years’ worth of inventory. Fifty such properties are listed in Arroyo Grande alone, and more than 40 each in Paso Robles and Cambria.
The sales also are not happening quickly, real estate agents say.
The average days on market — from the time a home is listed to the time it’s considered a pending sale — is 216 days. In a normal market, it usually takes about three or four months to close a deal.
“The reality is that some of them that have been sitting for a long time haven’t had the price adjustments they needed,’’ Wilson said. “Pricing is the factor, and the difference between a sale and no sale.”
Steve Gonzales, co-owner and managing partner of Cornerstone Real Estate in Shell Beach, said some homes have been for sale for more than a year. Homes in the high $900,000s to the low millions have been particularly tough to sell, he said.
One ocean-view home near the Cliffs Hotel had been listed for more than $1 million. A potential buyer recently offered $850,000.
“The buyers are out there lying in wait, waiting for the next homeowner selling for a million to reduce it to the $800,000s or $900,000s,’’ he said.
Richard Watkins, an agent with Gilligan Real Estate in Cayucos, said the values might be there, but the buyers aren’t biting.
“The problem is that too many people who would like to buy in those prices ranges have to sell someplace else, and selling isn’t an easy thing to do these days,’’ he said.
The slowdown in higher-end sales is happening across California, said Andrew LePage, spokesman for MDA DataQuick, a Southern California-based real estate tracking firm.
In California, 9,361 homes — including new and existing houses — priced at $1 million or more were sold from January to August this year, compared to more than 15,800 in the same period the previous year. The greatest number of million dollar-plus homes sold in the past five years was in 2005, when the firm recorded 28,411.
Financing is difficult
A DataQuick analysis of the million-dollar home market earlier this year found that the plunge in sales has been the result of a lack of prestige-home financing and the decline in the value of many homes over $1 million.
A National Association of Realtors report on the jumbo mortgage market — anything that exceeds the $687,500 conforming limit in San Luis Obispo County for government-supported mortgage financing — said the continuing credit crunch for jumbo loans had stalled high-priced home sales despite “some recovery taking place in some mid- and low-priced home markets.”
Earlier this year, legislation temporarily increased the conforming loan limit in high-cost areas, including California; the idea was to make it easier for homebuyers to qualify.
Even so, Lawrence Yun, chief economist for the National Association of Realtors, called credit standards stringent and noted that mortgage rates on jumbo loans “in general continue to remain very costly.”
Kirk Lesh, an economist with California Lutheran University, said he doesn’t see the housing market showing a marked improvement anytime soon, whether it’s on the low or high end of the price spectrum.
The jumbo-loan market hasn’t completely dried up, but it has become much smaller because banks remain skittish, he said. Moreover, the state’s economy is in ill health, unemployment is high and incomes have declined.
“Our forecast still calls for a decline in the median home price,’’ he said. “I think the higher-end homes will suffer a little bit going forward.”
While Gonzales acknowledged that the inability to finance such high-end homes has reduced the pool of buyers, he believes that should slowly improve as lenders start to loosen up the reins and “jumbo loans resurface.”
“Lenders are now starting to get comfortable again lending millions,’’ he said. “It takes a little bit of time for borrowers to feel comfortable borrowing that kind of money again.”
But then there are always those who can afford to buy what they want.
“We do a lot of vacation sales in our office … wealthy Central Valley farmers who are financially sound,’’ he said. Gonzales added: “And you can always count on a core of super strong buyers who will flop down a million or two in cash.”