San Luis Obispo (North) County 2022 Real Estate Review and 2023 Forecast

This past year has been a roller coaster as we have seen many homes sold in a day with multiple offers and at year end, with interest rates the highest in 20 years, buyers seem to be pulling back and waiting for sunnier days.  Homes in North County appreciated 7+% and the median price rose from $630,000 in January to $675,000 at year end.  During the last quarter of 2022, the number of single family real estate sales dropped almost 50% compared with that same time frame in 2021.  New listings dropped 32% from year to year.  And mortgage rates have risen into the high 6% category.

Going into 2023 it appears that we will have a bumpy ride at least in the first quarter.  The main issue we will face is supply.  And it is demand, even with high interest rates, that will keep current values from eroding.  The demand for this area is related to events of the past 2 years. Quality of life overtook housing affordability as a buyer’s main reason for relocating.  The urban areas to our North and South continue to deteriorate in living conditions and we will therefore continue to see urban refugees relocating here.  Even with higher interest rates remaining into 2023, the Central Coast of California is still a great value for these buyers.  Therefore, we expect moderate demand, an increase of cash and high cash purchases, and more stable pricing.

There is no prediction that current values of homes will erode.  New construction is picking up but will not materially impact the supply deficit in 2023.  Home owners with ultra-low mortgage rates seem to be unwilling to sell, even when in a good equity position.  The concern is the inability to find something better and less costly than where they currently reside.  And if you are going to live in California, it is hard to find a quality of life that is better than this area.

Paso Robles is a dynamic force in the California wine industry.  Major American and International companies are investing in large long-term positions in local vineyards and wineries.  Agriculture tourism has exploded on the Central Coast which fuels our hospitality industry.  Vineyard and winery sales have been steady throughout the last year with strong pricing.  Fruit seems to be in a balanced economic position despite last year’s short crop.  Vineyard replanting costs and farming costs have significantly increased.  

Commercial real estate in North County will hold its own in the face of higher interest rates and economic uncertainties.  Multi-family product will continue to be in strong demand for investors.  Warehouse and Industrial product should be stable.  Retail is recovering and office product will still be tepid from a demand standpoint.

But single family housing is the gold standard.   Even with a lower level of appreciation, owning a home is a better wealth builder than any other investment.  Not all real estate is created equal.  Many regions in the country may see double digit percentage value drops.  But our local economy will showcase our resiliency and desirability in San Luis Obispo County.  

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