The San Luis Obispo County real estate market took several important steps towards a long-lasting recovery in 2012. In this report, we will explain the reasons why. We break down home price and sales trends in cities across San Luis Obispo County using graphs and visual aids. We conclude with discussion about where the market will go in 2013, which we base on analysis of local sales statistics and information presented by local realtors.

The two most basic numbers that emerge from the 2012 San Luis Obispo single-family residential real estate are improvements in the median price – up 7.05% – and total sales – up 12.81%.

Even more encouraging for future prospects, the total ratio of foreclosure properties on the market has declined to the lowest level since 2007. This metric is especially important in monitoring price movement, as too many discounted REO (lender owned) properties on the market can bring home values down, thus causing borrowers to owe more than their home is worth.

For San Luis Obispo County, the share of foreclosure listings fell 9.0% to 15.0% and “normal” sales jumped to 71.0% of the market – the best ratio since the bubble popped in 2007.

Amidst this improvement, we saw a steady decline of real estate supply on the market. Nationwide, inventory fell to between 4 and 5 months to end the year. If San Luis Obispo County mirrors this level and if demand for property remains consistent, we would expect to see the following in 2013:

  1. Home prices continue to rise.
  2. Home sales drop until higher inventory levels are met.
  3. Construction increases to meet demand.
  4. New sellers enter the market to meet demand.

We have already published our forecast for mortgage rate movement in 2013. We expect that interest rates will remain low and affordable moving forward. The major question will be if inventory can expand to keep up with this affordability – and with increased consumer demand.

Using Keith Byrd’s local real estate statistics aggregator (as seen on, we have prepared a report with some of the most interesting housing market statistics in 2012. See more statistics on the Interactive Dashboard HERE.  Statistics can only explain so much, though, so we also set out to get anecdotal opinions from local realtors.

Following is our report:


San Luis Obispo County Home Prices

2012 Price Change

The median home price rose 7.05% from 2011 up to $395,000, putting it around levels we saw in 2002 and 2003. Prices remain 32.71% down from the peak of $587,000 we saw in 2006. Despite recent gains, prices are still at their second lowest level since the bubble popped.

The price increase has been pushed by REO properties. Normal (+1.29%) and short sale (+0.30%) properties made incremental gains from 2011 to 2012, but REO prices jumped 6.91%. Furthermore, as fewer “distressed” (REO and short sale) properties populate the market, prices have moved up towards the “normal” property median price ($430,500).

2012 Median Price

Local realtors we spoke to unanimously agreed that 2012 was a step in the right direction for the local real estate market.

“Most agents would agree that prices of homes are no longer declining,” said Robbin Hinson at Cambria Pines Realty. “Things have leveled out.”

Kellie Williams, owner/broker of Coldwell Banker in Cambria, also saw a turnaround in 2012. “I would say 2012 was a year where buyers confidence grew and the market started picking up. This was not as evident in 2010 and 2011.”

The graph below shows median home price movement for each month in 2012. The year started out low before jumping during the summer, and then settling to a median price just under $400,000 for the remainder of the year.

2012 Monthly Change

Part of the reason the market has been able to recover is due to renewed consumer confidence in real estate.

“The strength in the housing market exists because generally, people know that home prices are increasing,” said Patterson Realty owner/broker Wes Burk. “This reality exists due to the demand in the market place. which is dependent on consumer confidence.”


San Luis Obispo County Home Prices

There were 2,844 total single-family residential home sales in 2012, which is the highest total since 2005. In 2011, there were 2,5211 total sales.

Los Osos sales jumped 72.88% on the high end of the spectrum. Here is a year-over-year look:

2012 Sales

Here were the top selling cities in 2012, by single-family residential sales:

2012 Top Sales

“It seemed like an even balance of buyers and listings created a steady market,” said Williams.

Hinson agreed. She specifically noted that demand was strong in 2012, and “even homes that had been on the market for a long time have begun to sell.”

Steve Delmartini, realtor and broker at San Luis Obispo Realty, saw 2012 as a “nice bounce back year” with “good sales volumes.”

Demand was up across the board in 2012, and as sales increased, inventory began to decline. Of all the narratives in 2012, the increased demand/declining inventory has been one of the most prevalent.

Increased sales have helped to normalize the market. There are still many distressed properties out there, but the recent increase in demand  has helped buy up REO properties and increase the ratio of “normal’ single-family residential homes on the market.

2012 REO Mix

REO properties have dropped from a 26% share of the market in 2011 to a 15% share in 2012, as normal properties jumped from a 61% share to 71%.


What does it all mean? A look at 2013

“Low inventory has moved into 2013,” said Delmartini. “We will see fewer sales, but only because of lack of inventory. There is not a lack of buyers or affordability.”

The largest issue out there is inventory, but that comes with its own set of outcomes. For example, lower inventory will put upward pressure on home prices, as buyers compete for the remaining properties on the market.

“Inventory is low, causing home [values] to appreciate,” said Williams.

Central Coast Lending owner Daniel Podesto thinks that the demand for real estate, coupled with low interest rates and qualified buyer “will cause homeowners to sell their properties with confidence.”

Said Podesto, “Investors with properties they no longer desire to keep, empty-nesters wishing to downsize, move-up buyers looking for a property to house their growing families, they will all gain confidence that now is the time to sell.”

The year 2013 will also be the year of the short sale. Foreclosure activity fell in 2012, as lenders dealt with distressed properties in a more measured fashion. Short sales, for one, have increased.

Luckily, according to Delmartini, the foreclosure and short sale process is about to get easier thanks to the Homeowners Bill of Rights that went into effect on January 1, 2013.

What should potential buyers look to do in 2013?

“Buy now,” said Delmartini. “Last year, you could buy a standard condominium 2 bedroom for $250,000. Today you have $290,000 to $315,000 for the same product. What should a buyer do? Sacrifice some of what they think they need to have to get into the market, to take advantage of the market, and especially to take advantage of the interest rates.”

Emerging from the sea of technical terms, we were reminded how much we appreciate the ability to live on the Central Coast when Robbin Hinson brought up the human element at the end of her interview.

“On a little bit more of a heartfelt note, I think Cambria specifically (and the Central Coast) really draws people not only looking to make a good investment but who want to be part of a caring active and involved community…I would say Cambria and broadly the people of the Central Coast really get the phrase ‘be the change you seek!’ People feel fortunate to live here and indeed we are.”

Indeed! The strength of the Central Coast is in its people. We are honored to live and work here, and excited to see what 2013 has in store.


Central Coast Lending is a mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call 805.543.LOAN or email us here to set up a free pre qualification.