Homebuyers Flock to San Luis Obispo County as Resale Properties Become Scarce
Hey there, folks in San Luis Obispo County! If you've been hunting for a new home lately, you might have noticed that the pickings are slim when it comes to resale properties. You can blame those ultra-low mortgage rates that have kept homeowners stuck in their current loans for what feels like forever. Moving to a different place or upgrading to a new property has become quite a challenge.
The situation has led to a serious shortage of new listings each month, leaving the housing market with historically low inventory levels. In April, the National Association of Realtors reported that there were only 1.04 million existing homes available for purchase. And when we adjust for seasonality, the supply of homes for sale has been on a three-month decline, representing a measly 2.9 months of inventory at the current sales pace. It's quite a departure from the pre-pandemic days when there were around 1.75 million existing homes up for grabs.
This scarcity of listings is definitely putting a damper on sales transactions. In fact, existing home sales dropped by 4.3% in April, with a seasonally adjusted rate of 4.28 million—a significant 23.2% fall compared to the same period last year. Ouch!
But hold on! Don't lose hope just yet. Despite the lack of available existing homes, there's still good news. Demand is going strong, which is why more and more buyers are turning their attention to newly built homes. And guess what? The inventory for new homes continues to expand, making it an attractive option. In April alone, sales of new homes reached an annual rate of 683,000—an impressive 12% increase compared to the previous year. Beat those expectations!
Builders are doing their part too. They're offering enticing concessions like mortgage rate buy-downs and price cuts to lure in buyers. Although these incentives are starting to fade away, it's worth mentioning that newly built homes now make up 13.8% of all home sales, up from the pre-pandemic level of 11%. So, there's definitely some fresh options on the market.
But wait, there's more! In the near future, we might see even more new homes hitting the market in San Luis Obispo County. Why? Well, developers have been working hard, ramping up production in 2021 and the first half of 2022. While the pace of single-family housing starts has slowed down a bit, there's still a surplus of unfinished projects waiting to be completed and put up for sale later this year. Exciting times ahead!
Now, for those of you eager to make a move or get your foot in the door as first-time homebuyers, keep a close eye on those mortgage rates. They can make a big difference. Currently, rates have been a bit all over the place—lower than the peak levels reached in October last year, but still annoyingly high. As of the week ending May 12, the average interest rate on 30-year fixed-rate mortgages was 6.57%, the highest in two months. Rates have even gone up since then. Three years ago, that average rate stood at a much more favorable 3.37%. Yeah, it's been quite a hike, making it harder for some folks to secure home loans.
And guess what? These higher mortgage rates are actually dampening demand. Fewer households are applying for new mortgages, with the Mortgage Bankers Association reporting a 26.5% decrease in mortgage applications to purchase properties compared to the previous year.
Now, it's not just the lack of available homes and rising financing costs that are giving potential