What is going on in the SLO housing market?
There is a lot going on in the market here. When I look at the charts and data I can’t help but think that it’s a good time to buy or sell. I would call the market at an equilibrium/upswing and base it on a few simple things, which I will explain in a second. When the market is in a space like this it serves both buyers and sellers because as a buyer you are still getting good prices compared to where they were back at the peak of the market and as a seller inventory is moving pretty quickly and competition is strong. In a sense, both parties have some difficulties to deal with and some advantages that offset one another. So let’s break those down and explain my call on the market.
What I see as an advantage for buyers right now is most evidently, purchasing power. When we look at the median home price in San Luis Obispo city today, median home prices for all residential sales are up 11.7% from a year ago. However, they are down 2% from 15 months ago. To me this signals that prices are recovering at a pretty good pace and that would be a sign that it’s a good time to get in the market before things heat up. Interestingly enough, if we look at the difference in the SLO County Median home prices we are down 33% county wide from January of 2006 which suggests that home prices are discounted significantly and that buyers can stretch their dollars a lot further today than they could before. Now, couple the power that the buyer’s wallet has with the availability of money at cheap rates and you have a good position for any buyer to step up and get a good deal, provided they were able to survive the recession and maintain their credit score and save for a downpayment. The flip side to all of this is that inventory is at a low and properties are moving on and off the market quickly so buyers need to be ready to move.
What I see as an advantage to buyers right now is that there is an increased level of demand for homes. As buyers are realizing that they have strong buying power they are buying up homes and inventory is clearing out quickly which creates a great environment for sellers to list their homes. The average months inventory index for San Luis Obispo is a measurement that shows the number of unsold homes expressed in time as months that it would take for the house to sell at current rates. A falling index, which we have, is an indicator of a strengthening market and depending on a high number or low number shows whether the market favors buyers or sellers. A low number, like what SLO has at 2.8, suggests that the market favors sellers right now. I agree that it is a sellers market in terms of the index and competitive inventory numbers but we need to keep in mind that a lot of properties are selling for discounted prices from the peak of the market back in ’06 so some sellers may not be in a position to sell and feel like they are coming out ahead. The silver lining in this is that prices are coming back up, the November ’11 to November ’12 YTY average sold price is up 13.2%.
By no means is this analysis all encompassing of the market but I definitely think it represents the market right now in a very straightforward explanation with just a couple simple graphs and looking at what is happening in our office. If you have any questions about a particular portion of the market please call me and I will gladly help you look into that sector. You can also click on over to our home search function of the site and start looking at property on the market to see what I’m talking about.