The Central Coast — which encompasses San Luis Obispo, Santa Barbara, Monterey and Santa Cruz counties — was the only major California region to see its median price increase last month vs. May 2022.

The California Association of Realtors’ latest home sales and price report also found May was the first time in six months the Central Coast’s median price registered a positive year-over-year growth. But while median home prices and sales in some areas rose, Realtors warned the local housing market could start to tighten even further for buyers who can’t pay top dollar.

San Luis Obispo Realtor Graham Updegrove said continued inventory problems are likely to be the “new normal” locally due high interest rates.

“Everybody that has a 3% mortgage, depending on what happens going forward, have little incentive to move,” Updegrove said. “There’s a fear factor built in.”

How did Central Coast’s relatively ‘hot’ housing markets compare in May? Well, according to the report …

Look across California, when sliced into five regions …

Central Coast: $1 million median was up 0.5% over 12 months. Sales fell 17%.

Central Valley: $485,000 median was off 5%. Sales dropped 20%.

Southern California: $800,000 median was off 5%. Sales dropped 22%.

Bay Area: $1.3 million median was off 11%. Sales down 24%.

Far north: May’s $380,000 median is down 11% in a year. Sales fell 22% in 12 months.

Here’s how markets varied across Central Coast counties …

San Luis Obispo County: The median home price dipped 6.1% from May 2022 to $875,000. Median home prices in the county also fell $50,000 short of April’s median price of $925,000, the CAR report found. The county’s active listings also fell 13.6% year-over-year to 292, but were up from the previous month’s 271 listings. According to the report, 234 homes were sold in the county in May. While that was 1.3% lower than May 2022, it represented a significant jump from the 143 sales in April.

Monterey County: Experienced a slight decline in median home price between April and May, CAR data showed, dropping from $953,000 to $902,000.

Monterey County: Home sales picked up, growing from 124 sales in April to 152 in May, accompanied by a corresponding bump in listings from 227 in April to 260 in May.

Santa Barbara County: Median price of $1.08 million in April similarly increased to $1.27 million in May, while active listings held steady from the market’s 227 listings in April, settling at 225 in May. This was accompanied by a slight increase in home sales, from 134 sales in April to 143 in May.

Santa Cruz County: Experienced a relatively large jump in home sales in May, going from 74 sales in April to 120 the next month, even with a more modest increase in listings from 185 to 219 month-over-month. Despite the high volume of sales, however, Santa Cruz County’s median home price held steady at $1.35 million month-over-month.

Lindsey Harn, a San Luis Obispo Realtor with Christie’s International Real Estate Sereno, said the market’s current conditions are unfavorable to sellers, as high interest rates discourage current home owners from foraying into the buying market.

Harn said nationwide, 92% of all current homeowners have a mortgage rate less than 6%, 82.5% have a rate lower than 5% and 62% have a rate lower than 4%.

According to home buying corporation Freddie Mac, the rate on a 30-year fixed-rate mortgage was as 6.67% as of June 22. Harn said that’s a sticking point for both prospective sellers with locked-in low rates who don’t want to see their monthly payment rise and prospective home buyers with lower incomes, who would be priced out of the monthly payment on a home.

Harn said this problem shrinks available inventory, as existing homes simply are not changing hands as frequently.

However, there’s a chance more determined and higher-income buyers will ignore the high rate, with the expectation of refinancing down the line, she said.

“There’s always an initial knee jerk reaction when the rates jump up,” Harn said. “Now people who are in the market have adjusted to 6% and 7%, so that shock value is not there. People that are smart realize they’re going to be better off buying now at today’s rates than waiting three to four months for another rate hike.”

Updegrove said the current market has changed his view on what happens to demand in tight markets.

What used to be considered unsustainable price growth is no longer a deterrent to sales, because high income buyers will still be able to buy the least affordable properties.

“If we do have low inventory that is not meeting the demand, then you will continue to have buyers that are buying property that can afford it,” Updegrove said. “I think, unfortunately, or for better or worse, you know, some number of those are going to be out-of-town buyers.”

If nothing spooks the market, rates will likely come down eventually, but in the meantime, rate hikes are likely to continue through 2023, Updegrove said.

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