Autumn 2024 Market Update

Greetings and Welcome to our Autumn 2024 Newsletter!

Market Update: From Wildebeests to Rate Cuts

You may have noticed that the Summer Edition was skipped, but I can assure you, it was for good reason. I took some time away from work, tracking every move of the markets, and writing. The family and I traveled to Dubai, Barcelona, and then an epic adventure throughout the Serengeti and Ngorongoro in Tanzania, where we visited four different safari camps. Cessnas on dirt runways, 5AM game drives, and nature raw and uncut left me and my family permanently changed. It was the trip of a lifetime and gave me an even more worldly perspective, which I hope can come through not just in daily life but in this very newsletter!

The big news in real estate and any other sector sensitive to the cost of capital was the Fed's decision to begin their rate-cutting cycle, starting with a 50 basis point cut a few weeks ago. The winds have changed direction, and it’s now at our backs. The logjam of would-be buyers and would-be sellers will gradually begin to loosen up, and this will drive increased real estate activity.

A question we commonly get is, "Do rate cuts lead to higher real estate prices?" Yes, but not necessarily right away. While it is true that lower rates will help fuel buyer demand, there are also pent-up sellers. With pent-up supply coming to the market, price movement will be dictated by how supply and demand net out. The other factor determining prices will be overall market sentiment and psychology. Right now sentiment is mixed, as there is energy building up in the real estate sector but it is somewhat dampened by a tense and uncertain political and geo-political backdrop. Once we get through the volatility, however, we’re off to the races. 

Around the office, we've been very busy this autumn. We launched a lovely house-like condo at 829 Castro Street in San Francisco's Dolores Heights neighborhood a few weeks ago and received multiple offers; it closed about 10% above the asking price for $2,470,000. Shortly after that, we launched 219 Poplar Drive in Kentfield, a renovated single-story home with pool and located in the Ross School District for $5,500,000. We sold it in just two days on market for nearly $2,000 a square foot, one of the highest ever achieved in the neighborhood. 

We recently launched 1 Heuters Lane in Mill Valley for $3,998,000. This six-bedroom home is perched just above downtown Mill Valley and enjoys idyllic privacy, a flat yard, and multiple decks—all with epic views of Mount Tam. One of our more interesting listings is 3425 Shoreline Highway in Stinson Beach. This commercial property features four vacant buildings on an 18,000-square-foot parcel with 250 feet of frontage, which is the largest in Stinson. The property comes with an ABC license and a license to operate the included Airstream food and beverage truck. The property is listed at a very attractive $1,785,000 which is a great opportunity considering nearby residential properties in the area can reach $7,000 a square foot. 

We also recently listed a gorgeous single-family home near the Russian Hill/North Beach border on a quintessential alleyway at 30 Winter Place. This home is attractively priced at $1,998,000 and has the ultimate roof deck, just in time for Blue Angels. We also have a pocket listing at 2547 Post Street in Lower Pacific Heights. This 2,000+ square foot condo features 3 bedrooms, 2 baths, and 1 car garage parking. 

In terms of buyer activity, we are seeing a noticeable uptick in our buyer clients' inquiries and showings. We think this is the calm before the storm. Once we get through election volatility and have a couple more rate cuts under our belts, the market will really be humming along.

Prediction: Surfing the Next Mega-Wave

I'm no economist; I'm a real estate agent, but I do my best to try and understand macro forces and megacycles that are moving the markets. Right now there is a whole new internet being built. An internet infused with AI. 

The first iteration of the internet - think Prodigy and Alta Vista - was a “read only” internet. A place you went to consume and observe information. It was a one-way street.

When Web 2.0 came along, that enabled user-generated content to become part of the mix. This was the “read-write” internet, and it gave birth to some of the greatest companies and ideas humankind has seen (and some not-so-great ones too, but we’ll leave that for another discussion). This internet encouraged not just observation, but user participation, and is a two-way street.

Web 3.0 is happening now, and it is being built upon decentralized networks, blockchain technology, tokenization, and dApps. This phase seeks to create a more decentralized, transparent, and trustless internet, powered by blockchain technologies and artificial intelligence. The aim is to give users more control over their data, identity, and online assets.

AI overlays Web 2.0 and also the buildout of Web 3.0. This requires a new hardware layer, which explains the huge cap-ex cycle we’re in at the moment as hyperscalers are racing to see who can gain a competitive edge in compute, and thus have a competitive edge in the future of business, profitability, and ultimately, intelligence.

Right now we’re in the infrastructure build-out phase, with massive data centers being built or retrofitted with the latest chips, racks, and cooling systems. Energy demand is off the charts, so it will hopefully spur massive innovation in sustainable energy sources. It’s an exciting time and marks early innings for the next tech boom. 

Once the hardware layer is built, the next wave of software companies will come about as they populate the applications and intelligence layers. This will be a thrilling (and maybe even scary) part of this tech cycle. Existing companies will infuse their products with AI while new ones we didn’t even know were possible will spring up seemingly overnight. Some of them will go on to become the next megacap tech companies.

And where is all this happening? While tech and innovation have naturally spread to other markets around the US and the world, the Bay Area is still the undisputed heavyweight. With the cost of capital coming down (which basically means we’ll have more “fertilizer” for our startup garden), the next bull run is just getting started. Yes there will be pullbacks, corrections, and bubbles. But overall, this is a huge wave you can ride if you are brave enough to get on the surfboard. You don’t need to know exactly how this impacts real estate - that’s what we’re here for - but knowing this is happening and getting out in the waters could be a monumental move!

That’s it for this edition. Please reach out if we can assist any of your family, friends, or colleagues. We pride ourselves on knowing the big picture, making our clients better surfers for over 20 years now.

Warm Regards,

Arrian, Payton, Sejal, Lorelei, and Colin