2025 Year-End Real Estate Review: What Happened and What to Expect in 2026
As 2025 comes to a close, the San Luis Obispo County housing market looks very different from where we began the year. Early 2025 was defined by fierce competition, low inventory, and rapid sales. By mid-year, volatility in rates, shifting insurance costs, and broader economic uncertainty created a more cautious, analytical buyer pool.
Here are the three forces that shaped 2025 — and will continue influencing 2026.
1. Mortgage Rates Are Easing, But Affordability Hasn’t Fully Returned
Rates peaked mid-year and have since begun trending downward. This has brought many sidelined buyers back into the market, but affordability remains tight. A modest 0.5%–1% reduction helps, yet it doesn’t recreate 2021 frenzy conditions.
Expectation for 2026: A steady, healthy market — not chaos.
2. Inventory Increased… But Not in Ways Buyers Expected
From the newsletter (page 1) you noted key distinctions:
Prime coastal homes remain extremely supply-constrained.
Turnkey homes under $1M continue to sell quickly.
Homes needing updates or located in rural/insurance-challenged zones face longer days on market.
In other words: inventory is “up,” but useful options remain limited.
3. Insurance & Policy Shifts Are Reshaping Buyer Behavior
As highlighted on page 2, high premiums, underwriting scrutiny, and condition-related risk assessments matter more than ever. Buyers are increasingly selective about fire zones, defensible space, and maintenance history.
What This Means for Homeowners
Across the newsletter’s guidance:
Move-in-ready homes in desirable areas: Values remain strong; expect continued quick activity.
Homes needing updates or located in higher-risk insurance zones: Longer market times and strategic pricing discussions are the norm.
Unique or rural homes: Presentation, positioning, and timing matter more than the general market trend.
Bottom line for 2026: Expect a steady, strategically driven market where condition, price, and location determine outcomes far more than county-wide headlines.