October 2022 Real Estate Market Report

BOO! Welcome to a special Halloween edition of the Artemis Advisor. We hope your autumn is going well and accept our preemptive apology that there’s simply nothing to write about at this time. Just kidding. There is almost too much to write about so we’ll have to give you the bullets. But first…

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Market Update: Bartender Says “You’re Cut Off”

So, what’s happening in the markets? The main story is that the Fed, in an effort to curtail inflation, swiftly took away the proverbial punch bowl and the markets are left with a headache-inducing hangover. Interest rates have increased so quickly that, according to mortgage originators, purchase applications are down 42% and refi’s down a whopping 86% year over year. The Fed’s goal of demand destruction is working— there’s no doubt about that— and we’re feeling the effects here in our local markets. Oh, and they really haven’t gotten into Quantitative Tightening yet, so there’s that.

What oftentimes is not talked about, however, is that the Fed’s actions also create supply-side destruction. Homeowners, even ones that would like to move, are staying put if they locked in favorable rates. Inventory across all markets is in decline, a significant oppositional force.

So where does that leave us? The market has sand in its gears. Deals are getting done but sales volume is down precipitously across the board, no matter what housing market you look at. Despite this, we were able to get 3 offers for our client at 2450 Larkin Street in Russian Hill, and sell for $3,225,000 (7.5% over asking). Larkin had been marketed by another agency earlier this year and was unable to sell. Once Artemis took over the listing, we were able to deliver a great result for the client. Not bad in this gummed-up market!

We were also able to score quite the deal for one of our buyer clients at 1538 Lake Street. This home had been on the market for $3,750,000 and we scooped it up for $3,250,000, closing a couple of weeks ago. Single family homes along the Lake corridor are hot commodities, so this was a big win for our buyer.

Monthly Prediction: 2023 - The Year of the Balance Sheet

We’re left with many head-scratching questions given the current environment. Will the Fed make any meaningful progress battling inflation or will it persist? Will the Fed decrease rate hike targets, pause, or even pivot? All eyes are on the macro— but hey— as a reader of our newsletter you already knew that would happen. In fact, as we wrote back in December 2021… “Usually when we talk real estate, we talk micro. Micro markets, hyper-local trends, block-level data— you get the gist. But in 2022 we expect the macro to reign supreme.”

This month’s prediction is based upon the Fed’s plan to continue rate hikes, or at the very least, pause and keep them where they are. Should we get deep into a recession, a big spotlight will be shone upon corporate, institutional, and household balance sheets. If a balance sheet is weak, it will be exposed. As a result, we could see households needing to sell during 2023 in order to avoid a forced liquidation. Contrarians with cash will be waiting on the sidelines, scooping up the best properties.

If the Fed reverses course, you can throw this prediction in the shredder. But for now, and with them still talking pretty tough, household balance sheets will be of utmost importance as we head into 2023 and beyond. 

For more market intel and a tailored strategy on what to do with your property, book a consultation call (or in-person visit) with us anytime by emailing [email protected].

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.

That's it for this month's update! We'll catch you on the next one...