Yahoo Finance 3 SLO County cities just joined the $1 million home price club — and others aren’t far off
Several more San Luis Obispo County locations have joined a growing club that’s getting less exclusive by the year: California cities with a median home price over $1 million.
According to Zillow’s most recent analysis, median home prices in three more San Luis Obispo County communities — San Luis Obispo, Arroyo Grande and Cambria — passed $1 million in early 2024, doubling the number of “million-dollar cities” in the county.
In 2023, the local list was limited to three SLO County beach communities: Cayucos, Avila Beach and Pismo Beach. But continued home price increases motivated by high interest rates throughout 2023 pushed median prices up across the county, Zillow’s data showed.
Realtor Ryan Kotschedoff with San Luis Obispo-based Eighty20 Group said this top-heavy collection of median prices is another factor that makes buying a home extremely difficult for many first-time homebuyers, and can be harmful to the long-term health of a region’s housing market.
“Affordability-wise, interest rates aren’t exactly sitting in the best of positions, so when it comes to the medium median price being a million dollars or more, I think that makes it nearly unattainable for first-time homebuyers especially,” Kotschedoff said.
Multiple SLO County communities added to ‘$1 million city’ club
Like the rest of California, home prices and demand has risen steadily in San Luis Obispo County over the past two decades.
According to Zillow’s data, at the end of March 2000, the county’s median home price was just $272,574 — a little more than quarter of what a median-price home goes for in San Luis Obispo County today.
In San Luis Obispo County, median prices broke the $1 million threshold in April 2023, and have stayed elevated since then, ending March 2024 with a median price of $1.062 million.
Zillow’s median price data showed most of the countywide growth occurred between 2020 and 2023, when the median price grew by nearly $210,000.
With the exception of Avila Beach — where median home values topped $1 million in March 2017 — the five other cities now above $1 million reached the threshold between 2021 and 2024, according to Zillow’s data.
California is home to 210 of the United States’ 550 cities with a median home price of more than $1 million, with most of these communities located near major cities such as San Francisco or Los Angeles and the rest dotting the coastline.
San Luis Obispo, Arroyo Grande and Cambria made up a quarter of the 12 California cities added to the million-dollar city list this year.
Kotschedoff said that as median prices have increased across the state, homebuyers have been at a natural disadvantage to investors with cash on hand and goals of flipping properties into vacation getaways or second homes.
A tight market with limited inventory and high prices rewards fast, cash-rich buyers — a description that doesn’t fit the average San Luis Obispo household, Kotschedoff said.
While median prices now starting at more than $1 million is of less concern to a potential investor, for an average San Luis Obispo household it can be the difference in being able to afford a down payment or not.
“A lot of buyers, while in escrow, might have locked in a certain interest rate, but if (the median price) increases a lot, their lender might not be able to support them on that deal anymore, just because a lot of buyers are on that brink of not being able to afford the property that they’re attempting to buy,” Kotschedoff said. “If the interest rate changes by a quarter of a percent, that can put them to an unqualified position.”
Can SLO County cities do anything to lower soaring home prices?
Getting out of the $1 million club in San Luis Obispo County is hard — but getting in is becoming more of a reality for more cities by the day.
Median prices in Morro Bay, Templeton, Creston and Nipomo are all sitting at $900,000 or higher, and could surpass $1 million in the next couple of years if price trends hold.
That’s not to say that median prices are extraordinarily high in every community.
Paso Robles, Atascadero, Grover Beach, Oceano, Los Osos and Shandon are the only communities in San Luis Obispo County whose home prices have some breathing room from passing the $1 million milestone, and occupy a wide range of prices, locations and population sizes.
The last time median prices declined across San Luis Obispo County for a prolonged period of time was between 2007 and 2012 in the aftermath of the housing market crash, during which the county’s median price fell from around $525,000 to around $350,000 — a roughly 30% decline over five years.
Kotschedoff said plenty of new developments coming on the market in San Luis Obispo and other $1 million cities start out at market rate, which just adds to the stock of homes that are unavailable to most buyers.
While approving large-scale projects such as San Luis Ranch are a good step for a housing-needy city like San Luis Obispo, many of those homes will enter the market at more than $900,000 and will sell for higher than that, he said.
San Luis Obispo was one of a handful of California cities that gained residents over the past two years, which is associated with increased competition and prices for the limited housing available, Kotschedoff said.
Kotschedoff said producing high-density, less expensive housing such as townhomes, condos and apartments at a large scale is one of the few ways to bring enough inexpensive units on the market to bring median prices down.
“Usually the best fix for an issue like this is just accelerated development, and more specifically, development of affordable-type housing, whether it’s an actual affordable housing initiative or just homes that are more affordable inherently,” Kotschedoff said.
Where are median prices now?
In San Luis Obispo County, median home prices can range between just under $500,000 in some communities and more than $1 million in others. Here’s how each community stacks up:
Avila Beach: $1.48 million
Cayucos: $1.34 million
Pismo Beach: $1.28 million
San Luis Obispo: $1.06 million
Arroyo Grande: $1.02 million
Cambria: $1.03 million
Morro Bay: $969,568
Creston: $957,379
Templeton: $935,002
Nipomo: $910,371
Los Osos: $852,809
Atascadero: $760,464
Grover Beach: $751,164
Paso Robles: $738,406
Oceano: $635,635
San Simeon: $620,795
Shandon: $483,246
