2023 YEAR IN REVIEW HOUSING MARKET – SLO COUNTY
2023 THEMES
The themes for 2023 have been two-fold, low inventory and high interest rates. This has made for a challenging market for first-time buyers, who have had limited options and seen some of their buying power decrease.
Fortunately, many sellers have been willing to negotiate seller credits to help pay down the rates and/or contribute to the buyer’s closing costs. Overall, we have seen values remain strong for 2023 due to low inventory and strong demand for Central Coast real estate, keeping equity safe for homeowners here in SLO County despite higher interest rates.
“There have been two themes for 2023: Lower than normal housing inventory and higher interest rates. We are at a 13 year low for home sales for the US and the last time we saw interest rates at 8% was the year 2000.”
– Joshua Farris, Broker Associate. Cal dre #01921964
“GOLDEN HANDCUFFS”
“The recent spike in mortgage rates has created a so-called golden handcuff effect. The term is often used to describe financial incentives employers may offer to discourage employees from leaving a company. For homeowners, a low mortgage rate is similar. Most homeowners today have mortgages with interest rates below 4% or even below 3%, after moving or refinancing when rates hit record lows during the Covid pandemic. Nearly 82% of home shoppers said they felt “locked-in” by their existing low-rate mortgage, according to a recent survey by Realtor.com.” CNBC.com
A common phrase we have seen in 2023 is “Golden Handcuffs or Lock-In Effect” which has put a damper on potential home sellers and encouraged them to stay put and not sell. This reduced housing inventory has led to values staying strong in SLO County, which is unusual for times of interest rate increases. With interest rates decreasing in November and December of 2023, we expect many more home sellers to move and decide to list their homes in 2024. This will help alleviate the low inventory situation we find ourselves in regarding the housing market here on the Central Coast.
LOW HOUSING INVENTORY
In 2021 we saw 4,229 homes sell. 2023 sharply contrasted with only 2,383 homes sold, a 19% decline from 2022. As discussed above, this is primarily due to higher interest rates “locking-In” home sellers with low interest rates.
This low level of housing inventory here on the Central Coast and in the USA overall has led to more new construction starts to meet the demand of homebuyers. We expect some of this new inventory to reach the market in 2024-2025.
“New home construction jumps, raising hopes for better housing market … The Census Bureau says U.S. companies broke ground on a surprisingly high number of houses in November. The agency says housing starts rose 9% from a year ago, primarily because of an 18% increase in starts on single-family houses.”
County-wide, Jan 2023 saw the lowest number of sold homes with 117. The busiest month was May with 280 sold houses in the County of San Luis Obispo.
We continue to see strong demand in North County with Paso Robles leading the way with the most homes sold at 503 sold units in 2023. Atascadero closely followed with 374 sold homes for last year.
The coastal areas remain hotspots for short-term rental investors, retirees, and vacation home buyers. We expect that demand to continue into 2024, but inventory to remain tight.
WHAT DO WE EXPECT FOR 2024?
“I expect a busy time for real estate here on the Central Coast for 2024. With lower interest rates increasing buyer purchase power and more inventory, we are likely to see a robust Q1 and Q2 of 2024. Now is the time to prepare, so we are recommending our buyers prepare now for the Springtime sales cycle and we are advising our clients looking to sell in 2024 to start now with the listing process so they are prepared in March, April and May.”
-Joshua Farris, Team Lead at Farris Real Estate Group.
Interest rates have reduced from a high of 8% in October to around 6.5% in Jan of 2024. The FED officials have indicated that we may see 3 more rate decreases in 2024, which would ease some of the challenges home sellers and buyers experienced last year. This will free up some inventory and give first-time homebuyers some more purchasing power. We also expect home builders to increase new builds for 2024, which will help with the inventory issues we have seen on the Central Coast. With some 40% of homeowners owning their home outright, we expect that equity to Overall, we expect a busy year in 2024 for the housing market here on the Central Coast.
NEW YEAR, NEW MOVE?
If you are considering a move in 2024 into a house or property that better fits your lifestyle and stage in life, reach out to our award-winning team, we are here to partner with you and help guide you with all things real estate here on the Central Coast. Whether you are looking to buy your first home, upgrade your current home, invest, or maybe you want to downsize, we have you covered.
We have a consultative, value-first approach tailored to your needs, goals, and timeframes.
Real Value • Real Results • Real Simple.
Joshua Farris
Team Lead | Farris Real Estate Group