Greetings and welcome to the latest edition of the Artemis Advisor! It’s been a wild ride so far in 2022, with interest rate hikes taking center stage in this quickly changing environment. The macro backdrop has become of paramount importance, something we predicted back in December 2021. As readers of our newsletter, we know you weren't caught off-guard!
Market Update - Market Coming More Into Balance
While it’s true that rate hikes have dampened demand for housing, it certainly has not stopped the market dead in its tracks. We’re still seeing healthy demand and expect that to continue. Matter of fact, with more rate hikes on the horizon, many buyers are choosing to accelerate their rate locks and get into housing ASAP. What remains to be seen is how much further banks will raise rates. The Fed plans 6 more raises this year, but conversations with different mortgage contacts has led to the theory that most of the retail hikes have already happened. Emphasis on the word “theory” here— we’ll be tracking closely.
A few tales from the trenches since last writing — 3838 25th Street in Noe Valley (not our listing or our buyer - but newsworthy nonetheless!) was listed for $3,750,000 and sold for $5,800,000. That’s $2,050,000 over asking and $1,950/square foot! Across the bridge in Marin, 30 Sarah Drive in Mill Valley was listed for $2,495,000 and just closed for $4,225,000, a whopping 69% over asking, $2,189/square foot, after receiving 16 offers. Marin remains hot while San Francisco is more house-specific. But both markets are churning along nicely.
Monthly Prediction: Home Appreciation Settles Down
With rate hikes dampening demand, will we see prices hit a peak then settle onto a plateau, or will prices regress to the mean? That’s the big question and leads us to this month’s prediction.
Let’s be frank. Our local marketplace has taken a few sizable cannonballs to the hull recently. A huge amount of wealth destruction has come in the form of the “tech wreck”, an unrelenting revaluing of tech companies that began last November. Darlings of the industry have gone down in market caps 40, 50, even 80% in some cases. Netflix, DocuSign, and many “pandemic” stocks have plummeted, with shareholder value being vaporized. Private equity and VC deals are being revalued, with some firms sitting on their hands in wait-and-see mode (and who could blame them!)
Add to that out-of-control inflation and quickly increasing interest rates— both of which erode purchasing power— and you’d expect the entire market to go belly-up with real estate prices plummeting. But they haven’t, and we don’t expect them to. Our thesis is that appreciation will decelerate and we could settle onto a plateau— a period of relative stability in housing prices and a more balanced market. There are no clear signs of a fallout, and if one was going to happen, the aforementioned cannonballs should’ve sunk the ship. For now, it’s still cruising at 20 knots and has survived the onslaught.
Because real estate lags, our tap-dancing shoes are on just in case the soft-landing narrative changes. But for now, it’s still a healthy market with plenty of demand— especially for "blue chip" properties.
Click here to read the San Francisco market report.
Click here to read the North Bay market report.
That wraps up this edition of the Artemis Advisor. Stay tuned for more updates as market conditions can turn on a dime! Be sure to share the newsletter with anyone you feel would enjoy the content, and don’t forget to follow us on social media. Till next time!
NFA / DYOR - Not Financial Advice / Do Your Own Research
Information provided herein is for informational purposes only and is subject to change without notice. This publication does not constitute, either explicitly or implicitly, any services or financial advice by Artemis Real Estate. Information provided is not guaranteed, and Artemis does not guarantee the accuracy of any information obtained from a third party.