A walk through Monterey, Carmel, or Pacific Grove now reveals a clear change: “For Sale” signs linger for weeks, sometimes months. Homes that once drew bidding wars within days are sitting quietly, waiting for buyers who can afford them—or buyers at all.
The Monterey Peninsula, known for its oceanfront estates and Pebble Beach luxury, has seen its housing market slow sharply. The issue isn’t lack of demand—many still want to live here—but rather that most people simply can’t afford to buy.
“There’s just no inventory, or people are priced out of the market,” says Bryan Hermanson, a broker and mortgage lender who has worked on the Monterey Peninsula for 45 years. “That’s probably the biggest problem.”
Where the Market Stands Now
Across the seven cities of the Monterey Peninsula—Carmel, Pacific Grove, Monterey, Seaside, Marina, Carmel Valley, and Del Rey Oaks—homes are taking far longer to sell. Properties that used to move within two weeks now average 28 days or more on the market, a roughly 40% increase in days on market compared to recent years. Sellers who once received multiple offers are now cutting prices after several weeks with no serious interest.
The lowest entry point is around $800,000 in Seaside for a modest two- or three-bedroom home under 1,500 square feet. In Carmel or Pacific Grove, starter homes begin at $1 million for about 1,200 square feet. There are plenty of luxury listings above $2 million, but far fewer buyers able to purchase them.
The slowdown is visible beyond sales data. Some real estate agents are letting their licenses lapse, and mortgage brokers are seeing fewer new clients. The number of homes closing each month is a fraction of what the region saw just three years ago.
Why the Market Stalled
Three main factors have combined to freeze the market.
First, mortgage rates jumped from the low-3% range during the pandemic to over 7% in late 2023. Rates have since settled around 6% for conforming loans, but that is still double what most existing homeowners pay. “Anybody that owns a house is not refinancing,” Hermanson says. “They all have 3% interest rates.”
This rate gap has created a lock-in effect: homeowners with low-rate mortgages are unwilling to sell, because buying another home means trading a 3% loan for 6% or 7%. As a result, inventory has dried up.
Second, home prices kept rising even as borrowing costs increased. A million-dollar home that once seemed attainable now requires a household income of over $200,000 and a six-figure down payment. Single buyers—even those earning $80,000 or $90,000 a year—are priced out.
Third, the region’s economy is dominated by tourism, hospitality, and service jobs, which often pay $40,000 to $50,000 a year. Hermanson points out that even dual-income couples struggle unless both partners have high-paying public sector jobs like firefighting or teaching. Wage growth has not kept up with home price increases, making it even harder for local workers to buy.
Who Can Still Buy
Most sales now involve either wealthy retirees downsizing within the area or young, dual-income professionals stretching their finances to the limit. Hermanson recently helped a couple—both firefighters with a combined income of $250,000—buy a $1 million home after saving for four years. “She lives like a pauper,” he says. “She’s been able to save a lot of money.”
However, buyers like this are rare. Most first-time buyers have been priced out, and the once-robust vacation-home market has nearly vanished. Second homes that sold quickly in 2019 now sit unsold for months.
Foreclosures are starting to reappear. New subdivisions that sold out during construction are now seeing defaults as buyers realize they overextended financially.
What Could Change the Market
Hermanson says the market will not loosen up until mortgage rates drop closer to 5% or 5.25%. At current rates of 6%, buyers remain cautious; at 7%, activity nearly stops.
But even if rates fall, the real test will be whether incomes rise enough for more buyers to qualify. “Income doesn’t keep up,” Hermanson says. “Rates come down, more buyers qualify. Simple as that.”
Until both borrowing costs and local wages align more closely with home prices, the Monterey Peninsula is likely to remain out of reach for most would-be buyers.
Looking Ahead
The current slowdown on the Monterey Peninsula highlights a broader problem facing many high-cost California markets: persistent affordability challenges driven by high prices, limited inventory, and slow wage growth. Even if mortgage rates drop, the disconnect between local incomes and home values could keep the market stalled.
For now, the region remains highly desirable but increasingly inaccessible to the people who want to live there. Unless there is a significant shift in either rates or wages, the “For Sale” signs are likely to keep lingering, and the market will remain slow.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
About the Expert: Bryan Hermanson is the broker and owner of California Mortgage & Realty, based on the Monterey Peninsula. He has held both real estate and mortgage licenses for over four decades, specializing in residential sales and financing throughout Monterey County’s coastal communities.
