Rent and house prices continue to fall nationwide.  Will the SLO County market follow?

Rent and house prices continue to fall nationwide. Will the SLO County market follow?

A 2022 filled with house price increases across California finally began to cool off as the seasons turned to fall, and October was no exception.

Skyrocketing home and rent prices continued their slow decline in October across California, according to reports from the California Association of Realtors (CAR) and

As housing affordability begins to slowly climb, could these lower prices affect San Luis Obispo County’s typically island housing market?

Home prices and sales see steep declines across the state

On the Central Coast, the median home price in San Luis Obispo County fell from $875,000 in September to $815,000 in October, according to the CAR report, a 6.9% decline that brought prices almost at the same level as last year.

SLO County’s current median home price of $815,000 is now only 1.9% higher than the October 2021 median of $800,000.

The lower prices come as nearly 45.6% of homes in SLO County have sold below listing price, said Arroyo Grande Realtor Barry Brown.

“That’s where I think there are opportunities for buyers like right now,” Brown said. “When you were going into battle last year, at that time, the big problem you had was that there were a lot of people buying, and because of that there was a lot of competition for each of the ads that were there.”

SLO County was the only Central Coast county to show negative price growth in October, with neighboring Monterey, Santa Barbara and Santa Cruz counties seeing median month-over-month price increases of 5.2%, 23.2% and 11.9%, respectively.

This local number was an echo of trends seen by the rest of the state; California’s median home price ended October at $801,190, down 2.5% from the previous month, and was just 0.3% higher than the same time last year latest, according to the CAR report.

In addition to price declines, the 274,000 homes sold in California last month also continued a 16-month downward trend in home sales on a year-over-year basis.

That figure was good for an 18.5% drop from last October.

The CAR report blamed this continued slowdown in home price sales on rising interest rates on 30-year fixed-rate mortgages, which peaked north of 7% in October, according to Freddie Mac.

With the exception of downturns directly caused by the COVID-19 pandemic, these high interest rates resulted in the lowest level of sales since February 2008 and the largest year-over-year decline since December 2007. , according to the CAR report.

From its peak of 7.08% on October 27, the 30-year rate has fallen to 6.61% this week, signaling that interest rates may have peaked this year, according to the CAR report. .

Brown said a more subdued market may seem like a golden opportunity to buy a home, but there’s little difference in results.

In recent months, Brown said, many buyers have chosen to accept high interest rates in hopes of eventually refinancing their mortgages, making the idea of ​​waiting for a good interest rate pointless.

“Nobody ever rings the bell at the top of the market, and nobody ever rings the bell to let you know it’s the bottom of the market,” Brown said. “Trying to time the real estate market for a perfect purchase is pretty hard to do. It’s more just luck, rather than any kind of planning you can do.

Home affordability increases slightly statewide

CAR’s third-quarter housing affordability index also provided cause for optimism, rebounding from a 15-year low of 18% in the second quarter of 2022.

That means 18% of California households were able to buy a home at the median price of $829,760 in the third quarter of 2022, according to the report, based on being able to meet a monthly payment of $4,820 with a interest rate of 5.72%.

This would require a minimum income of $192,800 to qualify to purchase a median-priced single-family home.

It’s still too expensive for the vast majority of Californians, Brown said, but seeing housing affordability improve is still a good sign for the health of the market.

“At the end of the day, what really drives home sales is what someone can afford to pay each month in housing payments,” Brown said.

Despite a slight increase in housing affordability from 12% to 13% locally, SLO County still lags much of the state.

Only Mono County’s 8%, Santa Barbara County’s 13%, and Monterey County’s 13% housing affordability rates were as low or worse than SLO County between the second and third quarters.

However, despite some marginal improvements this quarter, markets across the state have yet to return to last year’s level of housing affordability.

In SLO County, housing affordability rates are still nearly half of the 24% they were in the third quarter of 2021.

Nationwide rents drop as some California cities see declines

Like the housing market, the national rental market has seen declines in recent months, spurred by a 2.5% drop in costs in September.

“September’s decline to 2.5% was the first actual monthly decline since February 2021 and the largest month-over-month decline since September 2020,” the report said.

While October’s national median rent of $1,983 represented a 7.8% increase from the same time last year, it still represented a 0.97% decrease from the previous month.

In California, where the median rent landed at $3,032, both of these trends were somewhat muted compared to national trends.

That was 4.65% more than a year ago, but down 0.31% from September.

Similarly, year-over-year, 90.7% of rental markets were up from October 2021, compared to 9.3% of markets registering declines, while month-over-month, 58 .1% of the rental markets recorded declines compared to the 39.5% which recorded increases. .

Brown said the high interest rates seen in recent months may have pushed up those prices as owners of newly purchased homes charged higher rents to offset higher initial mortgage rates.

“Obviously it may become less attractive for (homeowners) to buy an investment home (when rates are higher),” Brown said. “And if they do, they kind of have to pass more on to tenants.”

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John Lynch Profile Picture

John Lynch is a housing reporter for the San Luis Obispo Tribune. Originally from Kenosha, Wisconsin, John studied journalism and telecommunications at Ball State University, graduating in 2022.

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