August / September 2022 Real Estate Market Report

Arrian Binnings  |  September 16, 2022

Market Update + Prediction

…Aaannnd we’re underway! The autumn selling season has just kicked off and we’re here to give you all the scoops. We hope you had a nice summer and got a chance to travel — even if that meant your bags showed up a few days late. If you’re like us and were reading headlines all summer, you’d be convinced that the autumn market would be dead on arrival. But we’re happy to report that the headlines have shown themselves to be, thus far, hyperbolic (shocker!) Open houses are busy, deals are getting done, and the market is adapting to the new environment. Activity isn’t as robust as the spring, but we don’t think anyone expected that— after all, those are awfully big shoes to fill.
 
We just brought to market 2450 Larkin in Russian Hill. This three-story home has over 3,000 square feet, 3 bedrooms, 2.5 baths, and 3 separate outdoor spaces. A huge garage and elevator come with and the interior styling is impeccable. Have a look for yourself at 2450Larkin.com! This home is offered at $2,995,000.
 
We’re also about to bring on 99 Via Los Altos for $7,495,000. Located in a hidden-gem area of Tiburon and proximate to 101, this 5 bedroom, 4.5 bath home boasts over 5,400 square feet, has a pool, basketball court, and iconic view of the entire San Francisco skyline. We will be marketing this one privately during autumn, so if you know someone for it, you’ve now got the inside word. Reach out and we’ll get them in for a tour.
 
Market Update: A Mixed Bag
 
The bright spot in the market seems to be single family homes, whether they be in San Francisco or Marin, and more specifically, those that are presented and priced to sell. Aspirational pricing is not working so well in the new environment so we expect to see more expired and canceled listings by the end of the season than in years past. The financial markets are volatile, adding a backdrop of uncertainty everywhere you turn. At the time of this writing FedEx is down a whopping 22% on the day, which in some circles is seen as a bellwether stock that forecasts economic conditions that lay ahead. The real estate collapse in China and Europe’s energy crisis are also large-scale events that we’re monitoring for economic contagion— should their influence be felt in US markets, it could be a bumpy winter. Add to that midterm elections coming in November and all signs point to getting your real estate deals done in September and October!
 
All in all it’s a mixed bag out there and we didn’t even get into the inflation discussion. We’ll save that for another day. But regardless of what’s going on at the macro level, people still need homes and if open house traffic is any indicator, buyers are out, many are motivated, and some will even be in the driver’s seat when they find themselves not competing with anyone else for the home they want. It’s an interesting time and very property-to-property.
 
Monthly Prediction: Paying Points
 
Those of you that work in the mortgage business can skip this section, but for everyone else, this is quite interesting. Perhaps you’ve heard of “buying” or “paying” points in the lending world. Here is a quick illustration of how it works, and why we expect to see more of this tactic in the coming selling seasons.
 
Seller has a $2,000,000 listing and is having trouble selling; ie: no bidding war. Days on market is creeping up and their dreams of getting their $2,000,000 price tag are waning. Finally, a buyer comes to the table. The buyer is motivated, really wants this particular home, but is constrained by their monthly payment. Interest rates have gone up sharply and their purchasing power has been eroded, so what was once affordable is now just out of reach. The buyer’s lender has them locked at 5.375% and they can afford $8,000 per month in principal and interest for their purchase, and not a penny more.
 
However, for the $2,000,000 asking price, the buyer needs the seller to reduce the price to $1,783,000 in order for the deal to work. But, as you may have guessed, the seller is very reluctant to come down that much. That’s over 10%, a huge reduction! If the seller were willing to drop that much, it would make more sense for them to do a public price reduction and try to drum up more showings and traffic. So $1,783,000 is a non-starter, this deal is dead in the water. Or is it? With a $217,000 delta between the buyer and seller, how can we get this deal to work?
 
The answer is by paying points! The seller, while willing to budge a little, certainly isn’t going to come down $217,000. But what they can do is pay down the buyer’s interest rate on their loan. For $40,000, they can buy a point and get the buyer’s loan down to 4.375%, meaning the buyer’s principal and interest payment is back in the safe range at $8,000 per month. And boom! We have a deal at $2,000,000 with the seller paying a point.
 
A special thanks to our friend CJ Kerls at Guaranteed Rate for the math. We expect to see more of these types of scenarios taking place in an environment of rising rates, but unsurprisingly, it will be only the creative and savvy agents who offer up this type of problem solving for their clientele. If it weren’t obvious by now… the team at Artemis is always a step ahead. Thank you for your referrals and we’ll catch you in the next edition!
 
Click here to read the San Francisco report.
 
Click here to read the North Bay report.

 

 

 

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.



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