JOAN LYNCH, January 22, 2025
After the California housing market appeared to trend in the right direction toward the end of 2024, rising interest rates brought the market more in line with what home buyers have become accustomed to over the past three years.
Toward the end of a year in which median prices topped the $900,000 mark in San Luis Obispo County, interest rates finally started to drop into the 6% range, a potential sign that the rates would continue declining in the new year.
However, as interest rates spiked back up to the 7% range, some San Luis Obispo County Realtors said that the housing market of yesteryear may become the reference point for the market going forward.
San Luis Obispo Realtor Hal Sweasey said after an “explosive” 2022, a market based on high prices, low inventory and consistently high interest rates was something of an invevitability. Now, it’s a waiting game to see how long this new norm that’s friendly only to the wealthiest and best-prepared buyers will last, he said.
“I would call the 2023 and 2024 very stable, predictive, plug-and-ride-along years,” Sweasey said. “Would everybody have liked to had a few more sales? Sure. Would everybody like to have lower rates? Absolutely, but we didn’t have them, and people still did what they’re going to do.”
Interest rates reach highest point since summer
In 2024, interest rates appeared to be on the decline, potentially heralding the end of inflation’s stranglehold on home prices.
After reaching their highest point since 2007 market crash in October 2023 — a peak of 7.79% — 30-year fixed-rate mortgages appeared to be cooling in early 2024, falling as far as 6.08% in September 2024.
Even while the Federal Reserve made cuts to interest rates three times in the final months of 2024, rates have swung in the opposite direction, quickly climbing up to 7.04% as of Thursday, according to mortgage lender Freddie Mac.
It’s certainly not what many Realtors believed would happen with interest rates in late 2024.
The change in direction for interest rates is relatively unexpected; in a September report forecasting the 2025 housing market, the California Association of Realtors said it expected average interest rates to decline from 6.6% in 2024 to 5.9% in 2025.
The end of high interest rates was supposed to loosen up the associated “lock-in effect” that has prevented many homes from going to market over the past three years. In a post-pandemic market defined by high demand, sky-high prices and now protracted high interest rates, it’s a reminder that it’s probably not going to get easier to get into the California housing market.
Sweasey said barring a drastic change in direction from the Fed, it would likely take a significant event such as a national financial crisis to convince the agency to consider more aggressively lowering interest rates. It cut the federal funds rate three times starting in September, but Fed Chairman Jerome Powell has tempered his language on future cuts following the last reduction in December.
On a more local level, the lock-in effect will continue to dictate who can access the relatively limited housing inventory.
“The higher rates are going to limit the amount of movement, and that will make it trickier for our supply to increase, and that’s probably one of the few things that’ll get our prices down,” Sweasey said.
San Luis Obispo Realtor Lindsey Harn with Christie’s International Real Estate Sereno said October saw the “most sluggish” sales figures that she’s seen, but shortly after the election, activity started to pick up, leading to one of the busiest Decembers she’s experienced.
Harn said there’s plenty of uncertainty in the market following Donald Trump’s win, with Trump’s promised tariffs on imported goods playing a role in the uncertainty.
“The tariffs that are being proposed do create some level of inflation, and inflation is not good for interest rates — that keeps the rates high,” Harn said. “I’d say it’s really too soon to say, but all the experts I’m talking to are saying getting into the fives this year is, is probably very unlikely.”
Where did prices rise the most?
Though the county’s median home price crossed $900,000 and stayed there through the end of the year, San Luis Obispo County’s market ended the year with a median price of $930,000 — a decline from 2023, in which median price ended the year at $956,000.
That median price was the lowest of the Central Coast counties, according to California Association of Realtors’ December housing market report. Monterey County ended the year at a median of $932,000 while Santa Barbara County ended the year at $1.275 million.
In the city of San Luis Obispo, median prices ended the year 4.9% higher than the end of 2023, landing at $1.21 million.
Active listings in the county’s namesake city were up 44% compared to December 2023 with a total of 36, while sales of existing homes spiked by 106.2% from last year, totaling 33 in December.
Atascadero led all North County cities tracked by the report in price, ending the year at $930,000, though this price was only 0.3% higher than the ending price of 2023.
Listings in Atascadero were down 23.1 % from the previous December in Atascadero, with 13 homes were sold.
In Paso Robles, median prices rose by 21.4%, ending the year at $828,000. Home sales were down 23.3% year-over-year over that time with a total of 23 in December, while listings increased by 46.9% to 94 that month.
Templeton’s median price of $1.23 million was up 14% from December 2023, while home sales slowed by 37.5% with a total of five. Listings in the unincorporated community rose 23.1% year-over-year, reaching a total of 16 in December.
On the coast, Cambria’s median price dropped by 28.1%, settling at $935,000 to close out 2024. Though listings declined 7.1% year-over-year for a total of 26, home sales jumped up by 140%, with a total of 12 in December.
Morro Bay posted a median price of $1.15 million — a 22.7% increase year-over-year — while listings rose by 110% to 21 and home sales rose by 16.7% for a total of seven.
To the south, Los Osos’ median price dropped 39.1% year-over-year, ending 2024 at $840,000. Listings in Los Osos declined 16.7% over that time, while home sales increased by 75% with seven in December.
In the South County, Pismo Beach led all communities tracked in the report with a median price of $1.1 million, though that figure was 30.4% lower than in December 2023. Active listings fell by 34.8% year-over-year with a total of 15, while sales increased by 50%, reaching a total of six.
Grover Beach’s median price declined far less, dropping by 4.6% to $930,000 from the end of 2023. Listings were up 128.6% for a total of 16, while sales were down 16.7% for a total of five.
Arroyo Grande’s median price fell similarly to Pismo Beach, dropping 35.1% from the end of 2023 to $865,000. Over that time, active listings increased by 61.9%, totaling 34, while sales increased by 7.1% to 15.
Nipomo ended the year with a median price of $832,000, 21.4% lower than the previous year, while listings increased by 31.8% to 29 and home sales increased by 43.9% to 20 over that time.
Article originally published by The Tribune.