San Luis Obispo County’s real estate market is in for another challenging year as the economy inches slowly toward recovery.
Overall, the county’s housing market continues to be dominated by distressed property sales, contributing to the downward pressure on prices. Those who keep tabs on real estate say buyers and sellers should expect a slight improvement in 2011, but no significant swings up or down as the market struggles to regain its footing.
“There’s a great hesitancy among some would-be buyers, and to some extent would-be sellers, that the market is bottoming out,” said Andrew LePage, spokesman for DataQuick, a Southern California company that provides real estate information and analysis.
“But one of the main things holding back the market is the economy and relatively low consumer confidence. If there was brighter news about the economy, more people would feel confident.”
Adding to the uncertainty is the threat of increased interest rates, which have been at historical lows. As well, there are lingering concerns about the appraisal process (buyers who take out federally insured home loans can no longer have their mortgage broker select the appraiser), said Steve Delmartini, regional chairman of the California Association of Realtors and a San Luis Obispo Realtor.
Lending is also proving difficult, he added.
In some circumstances, Delmartini said, loans to buy property are not available.
“The sellers in the market are the result of what the buyers face,” he said. “If money is tight or if there’s a problem with the property appraisal, it affects the seller.”
When property does sell, it still boils down to price, real estate agents say.
“Price is everything,” Delmartini said. “It’s at least my belief that if you’re not priced right in the market, you will sit.”
Effect of foreclosures
Like many communities statewide, prices in San Luis Obispo County have fallen dramatically and may continue to erode.
The overall median price in the county — the statistical point at which half of homes sold for more and half for less — was $318,500 in January, down 13.2 percent from the same month a year ago, when the median price was $366,750, according to DataQuick.
The January median dropped nearly 5 percent from $335,000 in December. DataQuick recorded a peak median of $585,000 in June 2006.
Sales activity was up 10.5 percent in January from the same month a year ago, but down 18.5 percent from December 2010.
The federal first-time homebuyer tax credit, which expired last year, and price reductions over the past year helped sales last year, real estate agents say. The countywide median for single-family detached homes has declined for seven straight months since last July, according to DataQuick.
Foreclosures and short sales are a main driver in keeping home values down.
In January, distressed properties accounted for 27.7 percent of all homes that were resold, down from 31 percent in December and nearly 30 percent in the same month a year ago, according to DataQuick.
Lenny Jones, a Realtor with Jones-Goodell & Associates in Arroyo Grande, said he wouldn’t be surprised if, because of foreclosures and short sales, the market decreased in value an additional 5 percent in 2011. Sales of distressed property are more prevalent in the North County, where development blossomed during the boom, and are happening to a lesser extent in the South County.
“People had been trying to hang on, but they’re running out of money, and they have to give it up,” Jones said.
Linda Midkiff, treasurer of the Paso Robles Association of Realtors and a Realtor with Coldwell Banker Premier Real Estate in Paso Robles, said short sales and foreclosures have accounted for nearly 57 percent of her office’s total sales in the past six months.
“I wish I could be optimistic about 2011 for real estate,” she said. “Just looking at the trends in the city of Paso Robles, the median price of a single-family residence within the city limits is down 7 percent from January 2010 and down 3 percent from just a month ago.”
For potential homebuyers, however, the housing market presents opportunities for good deals.
“The silver lining in all this is that homes are becoming more affordable for first-time homebuyers,” Midkiff said. “First-time homebuyers were involved in nearly all of my transactions in 2010. That trend seems to be continuing.”
Lower prices and historically low interest rates helped to set new record-high levels of affordability statewide. The percentage of first-time buyers who could afford to purchase an entry-level home in the county was 57 percent in the fourth quarter of last year, according to the California Association of Realtors. The county, though, was the second-least affordable in the state behind the San Francisco Bay region.
With the housing market no longer being supported by tax credits and other measures, improvement in the economy will be more of a factor in the housing market recovery going forward, said Robert Kleinhenz, deputy chief economist with the California Association of Realtors.
The association forecast a 2 percent increase in 2011 over last year in the state’s median home price and a 2 percent increase in home sales.
Kleinhenz surmised that the county would likely see a small single-digit increase.
“By the end of the year, we will see some improvement, but it’s not at all the case that we can feel like we’re out of the woods,” he said.
Delmartini believes there’s a more positive attitude today than 18 months ago as people are more realistic about the market, the future of the economy and its recovery.
Even so, he understands that it won’t change overnight.
“It took a long time for us to get to this point, and it’s going to take a long time for us to get out,” he said.