January 2024 Market Update

January 25, 2024

Market Update + Prediction

January 2024 Market Update
Welcome to Payton + Binnings' inaugural 2024 newsletter! We hope you had a fantastic winter break with family and friends. In this edition, we will discuss the current state of our local real estate market while pointing out some of the most important macroeconomic factors influencing trends.
Market Update: A Perfect Storm Brewing
A perfect storm appears to be brewing, driven by three main elements converging simultaneously. 
Tech stocks. Wow. As you likely know, mega-cap tech companies have been leading the stock market in increasing market capitalization for well over a year. Much of that market cap finds its way to the Bay Area, serving as fuel for our local housing markets as a significant “wealth effect” unfolds. We anticipate that within the next 12 to 24 months, the market will broaden out, with small and mid-cap tech companies also starting to ride the wave. While periodic pullbacks in the financial markets will occur, the overall trend is upward, thanks to falling inflation and impending rate cuts.
Pent-up demand is another factor fueling our local real estate market. The past 20 months have seen especially low sales volume, a topic we've covered in previous newsletters. When sales volume is suppressed for an extended period, it can often rebound sharply once conditions improve. Conditions are improving as we speak.
These improving conditions are largely due to the third factor – the anticipation of interest rate cuts. Expected to occur sometime between March and July, the first of the rate cuts are encouraging many buyers to enter the market right now— beating the “rush”. However, as many buyers hold the same view, competition intensifies, and the time to beat the rush is ironically in the rearview mirror. This trend indicates that the return to a seller's market may be in the early stages of emerging— with the implication being the window for securing a “screaming deal” has likely closed. It’s early, but we’re already sensing a significant shift in market sentiment— measured by open house traffic, the number of offers on available homes, and information sharing with colleagues at our roundtable gatherings. To be clear, home values are not going parabolic— this is more an observation that residential likely bottomed out a month or two ago.
Macroeconomic headwinds are subsiding while innovation is accelerating, both of which will boost Bay Area real estate in ’24 and beyond. We expect the IPO market to thaw and M&A activity to increase this year, adding a decent tailwind. While the 2024 election is certainly on our radar, real estate tends to be less influenced by elections than other asset classes that are more nimble and/or volatile. Either way, we’ll be monitoring election impact as the year progresses.
The stock market has arguably gotten a little ahead of itself, and the US10Y yield has crept back up into the 4%+ range. We expect a pullback in stocks sometime in Q1 as bond yields continue to rise, but both of these should be relatively short-lived in our view.
To summarize, our outlook is cautious optimism, and we believe that most of the real estate market challenges we’ve experienced over the last 20 months are largely behind us, barring any black swan events. That doesn’t mean we’ve returned to 2021 or early 2022 froth, but it does mean that market sentiment has shifted coming out of the 2023 winter market.
Around the Office:
Our team has started the New Year strong with 2 buyer-represented sales. We represented a client at 181 Randall Street in Glen Park, which sold for $2,950,000, while the second property at 159 Bonview in Bernal Heights just closed for $2,900,000. Congratulations to our clients for landing their dream homes and sneaking in before the market takes off again.
We also recently listed a spectacular “modern Victorian” in Duboce Triangle— a single-family home at 74 Beaver offered at $2,495,000. We are also launching one of the best units at The Rockwell, conveniently located near Whole Foods at California and Franklin. This 12th-floor corner unit features 2 bedrooms and 2 baths with sweeping city skyline views and will be listed at $1,650,000.
One of our favorite listings is a charming condominium at 785 Dolores Street in Mission Dolores, professionally designed by the seller and interior design firm Together Home. Situated in one of the city's best locations, the lucky new owner will enjoy easy access to world-class shops, cafes, bakeries, and nightlife. Mission Dolores Park is just a stone's throw away, a destination whether you live in the neighborhood or not. This 2-bedroom, 1-bath condominium is being offered for $1,350,000.
Coming to the market soon is 969 Lombard Street in Russian Hill. This two-story condo boasts 4 bedrooms, 3 baths, an office, a studio/gym, and over 2,600 square feet, and has been nicely updated. It will hit the market for $2,478,000 in late January. 
We also have an additional San Francisco listing in Cow Hollow and a Mill Valley single-family coming soon – so stay tuned for updates in our next newsletter.
Thanks as always for reading, and if we can assist you or anyone you know in their real estate endeavors, please feel free to reach out.
The Payton + Binnings Team

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