San Luis Obispo County’s housing market is on the rebound.

The median price — the point at which half of residences sell for more and half for less — continues to rise, sales have picked up and foreclosures have fallen.

A strengthening economy has played a key role in the housing market’s comeback, and real estate will be a significant contributor toward economic growth this year, economists say.

“It’s on an upward trend,” said Jordan Levine, economist for Beacon Economics, a Los Angeles-based independent research and consulting firm.  “The economy is improving, tourism is doing well and more people are back to work, and there’s not a lot of inventory.”

California traditionally suffers from an undersupply of housing, Levine added. That lack of housing supply has kept prices higher in California relative to other states, and has resulted in pent-up demand.

“The supply issue is starting to express itself,” he said. “It wasn’t as big an issue when the housing market was in the doldrums. But now, it has become more obvious as demand rises.”

The unsold inventory index for San Luis Obispo County, which indicates the number of months needed to sell the supply of homes on the market at the current sales rate, was 3.5 in May, according to the California Association of Realtors. A six- to seven-month supply is considered normal.

But some inventory relief should come in the second half of this year, as homeowners who had been holding back decide it’s time to sell, said Leslie Appleton-Young, chief economist for the association.

“There are people that are still underwater; over 20 percent of the mortgages in California are underwater,” she said. “But that’s changing rapidly as prices go up. More will be above water and will either stay or list their home.”

The all-home median price for the county, which includes new and resale single-family detached homes and condos, was $421,500 in May, 12.4 percent higher than the same month in 2012, according to DataQuick, a Southern California-based real estate tracking firm. May marked the 13th consecutive month in which the county’s median home sales price saw a year-over-year increase.

However, the May median sale price was still 23.4 percent lower than the peak May median of $550,000 in 2006.

A total of 394 homes were sold in May 2013, up from 361 sold in May 2012, a 9 percent year-over-year increase.  Most of the homes sold in the county are existing, single-family homes.

The median price for resale homes was $435,500 in May, a 13.1 percent year-over-year increase. Sales for existing, single-family homes grew to 325, a nearly 5 percent year-over-year increase.

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Real estate market looking up in county | Local News | SanLuisObispo.com.