Flight Instructor reported during a simulated engine failure the student pilot descended below 500 feet.

Narrative

On Date; during a training flight from ZZZ1 to WVI over the fields around San Juan Bautista at about 3;500 ft. AGL; I pulled the power to idle simulating an engine-out scenario. My student trimmed for best glide; picked a landing area and went through the emergency checklist during the descent. The pattern setup was too tight and it became apparent that a landing would be too long for the location picked. Instead of calling off the approach; I let him descend below 500 ft. AGL. I'm an inexperienced flight instructor. While I hold my CFI certificate for over XX years; I started only recently providing primary flight training.In my own early training; I had a this-is-only-a-simulation-attitude towards emergency landing practice; which is common and to be expected in a training environment. Only in my training towards the CFI certificate did I learn to treat those simulations seriously; as in I-WILL-MAKE-THIS-LANDING. I sensed the it-is-a-simulation-only attitude in my student; and got too wrapped up in making a point. Lesson learned: A simulated engine-out towards an airport instead of fields provides the same learning opportunity to end-up too short or too long; yet is protected by the exception clause: § 91.119 Minimum safe altitudes: General. 'Except when necessary for takeoff or landing...'