-July 20,2023-
You wouldn’t know it if you commute down Madonna Rd and notice all the construction going on at 577 home project called San Luis Ranch this summer but new home permits across San Luis Obispo County in the first half of 2023 is far below the pace seen in the past 5 years.
Reports from Construction Monitor so far this year, show single-family home permits at only 117 new homes in the county through July 13 compared to 328 this time in 2022, 385 by mid-year 2021, 365 in the first half of 2021, 365 in 2020 and 322 in the same time frame in 2019 – before the pandemic.
A closer look shows no builder in the county this year has permitted more than 12 homes while the year before Shea Homes permitted 52 new homes in Nipomo and Coastal Community Builders and WCP Developers (Wathen-Castanos) each permitted 42 units in the City of San Luis Obispo.
City of San Luis Obispo figures show a similar trend with 132 new home permits issued in the first half of 2021,107 during the same period in 2022 and as mentioned-just 42 so far this year.
City permit technician Matt LaFreniere says fluctuations are typical when large projects are launched like Avila Ranch, Righetti or San Luis Ranch that depending on timing – bolster the numbers. But going forward “there’s not a lot in the pipeline” that will continue a home building boom trend in SLO city, he suggests.
With new home production at a low level this year, one key factor has to be the rise in mortgage interest rates.Current rates in San Luis Obispo are 7.51% for a 30-year fixed loan, 6.74% for 15- year fixed loan and 6.72% for a 5-year ARM says realtor.com. Thirty year rates were 5.4% in July 2022 and 3% in July 2021.
Analysts say a surge in mortgage interest rates and a shortage of homes for sale has suppressed California home sales. If builders don’t pick up the pace of new construction, the problem is just going to get worse.
Not surprisingly new home starts across all of California are experiencing the same trend. Real Estate publication Firsttuesday reported in May that single-family residential construction starts were a steep 31% below one year earlier in the six-month phase ending April 2023. During those same six months, multi-family construction starts were down a slight 5% from the six-month phase a year earlier.
All building permits down too
Does the slowdown in home construction here reflect a slowdown in all building activity in the county?
Comparing the total value this year to 2022, all construction in San Luis Obispo was valued at $197 million through this mid-year vs $413 million during the same 6 months in 2022. All building permits through mid-2021 were valued at a still strong $350 million.
Bottom line – one could conclude we were seeing a construction slowdown in SLO County so far this year.
Despite a slowdown in permits right now, SLOs major projects have inventory available. San Luis Ranch says they have in their Legacy project – 198 approved -122 sold or under contract and 76 available according to marketing manager Cate Norton.
One large project underway is Wathen Castanos’ Avila Ranch in San Luis Obispo with a starting price in the mid $800ks. The development opened last year and built about 60 homes in its first phase -36 of them occupied. The 150-ace project is permitted for 720 homes.
A really big project on the drawing board is in Nipomo – the 1,318 home Dana Reserve subdivision scheduled to go before the SLO County Planning Commission Aug. 30-31.The project suggest it will offer all level of homes with a three-bedroom Dana Reserve home to cost $571,000 as compared to the Central Coast median home price of $1.02 million as of April 2023.