January / February 2023 Real Estate Market Report

February 14, 2023

Market Update + Prediction

Greetings and welcome to the first edition of the Artemis Advisor for 2023! We hope your new year is off to a great start and that you made it through the storms with minimal damage and power outages. Now… on to the market!

Market Update: Back from the Dead

We are happy to report that the real estate market has sprung back to life following a quiet 2nd half of 2022. We’ve had great traffic at our listings and both our local and nationwide colleagues are reporting the same. Although the refi business is on ice, lenders are reporting increased mortgage applications and borrowing rates have eased slightly. Early ‘23 has a completely different energy than late ’22. It will be a few months before any meaningful numbers come out, but in the meantime, here are some interesting spot-checks:

      • Our listing at 2900 Pierce #4, a Cow Hollow TIC, received enough traffic and interest for us to set an offer date. But an all-cash buyer came in preemptively with an over-asking offer, which our client decided to accept, forgoing the offer date. We just closed last week.
      • Our listing at 65 Corte Amado in Greenbrae also had very busy open houses, with up to 50 visitors in a two-hour window. We are now in contract.
      • Word on the street is 475 Jersey in Noe Valley received 17 offers and is closing soon.
      • 3450 Washington, asking $39.5M (yes, you read that right), received 3 offers and is closing soon.
      • A listing at The Pacific (2121 Webster #507) got three offers and just closed $480,000 above the $4,500,000 asking price.
      • 9 West Shore in Belvedere, listed for $13,995,000, received multiple offers and will be closing for over $4,000 / square foot.
      • A Mill Valley home at 91 Sunnyside received 4 offers and is in contract before hitting the open market.
      • 22 Myrtle in Mill Valley got 8 offers and closed for $2,400,000 which was 25% over the $1,895,000 asking price.
      • Our colleague in Berkeley just got 27 offers on her $1,195,000 duplex for sale.

Buyers are definitely out in full force for some listings. Emphasis on “some”. The fact that some listings sit while others are hot commodities possibly points to a flight to quality in this new environment. And one thing all the multiple-offer listings have in common: they are strategically underpriced. In terms of action in various price segments— $2.5m and below is particularly active compared to higher brackets, but all are faring better than late ’22.

On the macro level, the Fed continues its fight against inflation. We’re sure you took note that the Fed raised rates another 25 basis points at their early February meeting. The Fed likely has a couple of small raises left in their hiking cycle, but (hopefully) nothing like the whiplash-inducing hikes of last year. The light at the end of the tunnel gives buyers a sense of stability, which could be driving much of the aforementioned traffic. Who knows, we might look back one day and determine that the second half of 2022 was the optimal time to buy.

There are still significant risks inherent in the marketplace that create an undertone of volatility. Reinflation is a very real risk, which could prompt the Fed to return to aggressive hikes. The effect of declining corporate earnings has yet to be fully felt, and the 2/10 yield curve is still severely inverted. Per JP Morgan, the recent bump up in the stock markets is, interestingly, largely retail investor driven, which begs the question, what is the smart money doing? Eyes glued.

Monthly Prediction: Artemis.ai

In case you weren’t paying attention, or didn’t pay it much credence, the world changed last November when OpenAI released ChatGPT to the public. OpenAI demonstrated that AI has moved from buzzword to legitimate use case for regular Joes. Anyone who’s played around with ChatGPT can reel the tape forward and see the potentially monumental societal changes we may undergo as this technology evolves.

And while ChatGPT is very impressive, it’s worth noting that it’s not actually intelligent. It doesn’t understand what it writes. It’s a large language model that is incredibly good at predicting the next logical word in a sequence, piecing together bits of information (and oftentimes misinformation) into familiar strings we call sentences and paragraphs. But give it some time. This is just the beginning.

In the meantime, here’s our monthly prediction: Get ready for AI-infused everything. AI this and AI that. Many companies and products— some legit and some scams— will glom onto the new fad and a bubble will inflate. There will be incredible, maybe even unprecedented growth in this area, which will add fuel to the next bull run. There will be a huge hype cycle— one in which we’re barely in the first inning. The meteoric rise of AI could wipe out a lot of jobs. Best not to get caught off guard here.

Hayes Valley in San Francisco is home to a burgeoning AI developer community and has positioned itself as the epicenter of the movement. “Bayes” Valley, as it’s sometimes called, refers to the Bayes’ Theorem, one of many mathematical theorems used in AI models. Others have coined it “Cerebral Valley”. Either way, this could spell interesting developments for Hayes Valley real estate in the long term. We’re watching this trend.

While AI promises to change the world— extending human lifespan, solving complicated “unsolvable” problems, and ushering in the biggest information (and misinformation) explosion humankind has ever seen, the power of it is truly unknown at this point. Search engines will become answer engines, children around the world (especially in developing nations) will have access to AI “teachers”, and check-ups with your doctor may never be the same. The promise is incredible but so is the downside risk. But we won’t write about that here— refer to Black Mirror for details. But on the whole, we remain optimistic for a bright future, turbocharged by AI “assistants” and models that solve some of humanity's biggest problems— or, at the very least— give us ideas we would’ve never been able to think of.

Click here to read the San Francisco report.

Click here to read the North Bay report.

Click here for a North Bay city-by-city breakdown.

We hope that gives you a snapshot of what’s to come and that you’ve enjoyed the download. Thanks as always for reading The Artemis Advisor, which, we’re proud to say, is never cut & pasted or ChatGPT’d. See you next time!

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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.

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