Greetings and welcome to another edition of the Artemis Advisor! We’re kicking off the summer with some timely market updates along with some buzz around the office. Summer 2022 seems well-primed for a chance to catch one’s breath, and many of the parents we’ve been talking to are as excited (maybe even more so) for summer as the kids! With a few of us traveling, it’s fun to take a quick poll around the office to see where folks are headed. Destinations include Paris, Berlin, Nantucket, Klamath River (Oregon), Vancouver, and Whistler. Where are you headed this summer? Here’s to safe and fun travels.
Back at the office, we’re thrilled to report that we’ve hired a new employee, Nick Lazarou, as Director of Operations at Artemis. Nick brings many years of experience in the business and will serve a huge role in Artemis’s future growth and expansion. Welcome aboard, Nick!
Market Update: Ice Bucket Challenge, Fed Style
With inflation overheating and asset prices ballooning, the Fed has initiated one of the quickest rate hikes in history, effectively pouring a bucket of ice water on the markets. In addition, the Fed just began QT (quantitative tightening), which sucks liquidity out of the markets and could lead to more headwinds for already-battered investors. Add to that corporate layoffs, which may be in early innings, and you can’t go a few minutes without hearing the R-word (recession - but you knew that!)
These forces find their way into real estate in myriad ways, but there still exist some significant tailwinds in the housing market. Demand has dampened but is far from dead, and historically scarce inventory has continued to plague the market (which puts upward pressure on prices). Rising rates could mean even more scarcity, as many people remain parked in their homes for fear of bigger payments if they leave. We have noticed open house traffic subsiding a bit- but not evenly across the board. Interesting dynamics are at play. Check out our Monthly Prediction below to learn more.
In the meantime, the annual summer slowdown has arrived. The normal (and fairly predictable) summer lull is - this time - mixed in with market headwinds, making it tough to discern how much steam is coming out of the market due to seasonality versus sharply rising rates. We won’t know for sure until the Autumn market plays out, so stay tuned for updates. And if you’re a buyer, be sure to get in touch as this may be your opportunity to sneak into the market while no one’s watching.
Monthly Prediction: Drawing Parallels
Okay - this month’s prediction is more like drawing parallels, but hang with me, and hopefully it will all make sense.
When asset prices began their decline, they didn’t do so all at once. The most speculative assets got hit first, and in many cases, have fallen the furthest. Anyone tracking crypto or Cathie Wood’s ARK ETF’s would’ve seen declines beginning as early as last November. Assets that rely on liquidity, low interest rates, and continued access to capital have taken a beating in this new environment, and they were the first to react to new market conditions.
While it’s true that more traditional companies with healthier balance sheets have also been brought down, they haven’t been hit nearly as hard and they took their first punch later in the cycle. The order in which financial assets are falling tells an interesting story- one which we may be able to draw some parallels to real estate.
For a few months now we’ve seen certain property types begin to feel the pain of shifting market conditions. Property types that, like their high-risk stock counterparts, thrive on low rates and liquidity (SOMA condos might be a good example). Once conditions change, those types of properties are the first to fall, and they often fall the furthest.
In a quickly changing environment, some property types will hold their value better and may not fall in value at all. These homes tend to be well-located, in good school districts, scarce in supply, turnkey (or made to be turnkey by your Artemis agent!), and less susceptible to interest rate action (attracts cash). Homes such as these may end up plateauing or even continuing to rise in value, despite a macro slowdown. Time will tell.
So that’s this month’s prediction (hypothesis might be more accurate). Homes that thrive on liquidity will experience the slowdown not just first, but the hardest, while those less dependent on liquidity will fare much better. As with anything, they’ll be on a spectrum. Some homes will be significantly affected, others less so, and a million situations in between.
That’s why it’s essential to have the best real estate counsel you can possibly get. Please reach out if we may be of assistance- or share our newsletter with anyone you feel would find the information valuable.
Click here to read the San Francisco market report.
Click here to read the North Bay market report.
Have a most wonderful summer and we’ll catch you next time!
Disclaimer
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.
