SF mansion symbol of drop in luxury home sales

With the November election and typical holiday slowdown nearing, and mortgage rates still rising, “some agents are just laying low, regrouping, planning for 2023,” he said.

The number of sales in the luxury market in September in all three major Bay Area metro areas — San Francisco, Oakland and San Jose — hit their lowest level for that month since listings website Redfin began keeping records in 2012, its analysts said. Redfin defines luxury homes as those estimated in the top 5{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} based on market value.

While sales did not hit an all-time low, they came close to the records set in 2019, in February — traditionally one of the
slowest months of the year
for the Bay Area luxury market.

The severe downturn wasn’t limited to the Bay Area: The number of luxury homes sold nationwide in the three months ending in August dropped 28.1{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} from the same period last year, according to a Redfin report.

The drop far outpaced the record 19.5{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} year-over-year decline for non-luxury homes and was the biggest since at least 2012 — a dramatic pendulum swing from the record
61{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} increase
in luxury home sales recorded from 2020 to 2021.

High-end home sales in the Bay Area have taken the worst hit of all. The Oakland metro area saw the steepest year-over-year drop in the number of luxury home sales among the 50 most populous U.S. metros, at 63.9{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05}, Redfin data showed. It was followed by the San Jose metro, with a 59.6{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} decrease. At No. 7 was San Francisco, with a 49.6{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} drop.

Big-budget buyers who crowded the luxury market during the pandemic due to stock market gains, record-low mortgage rates and the flexibility to work from anywhere have now retreated, the report said. Driving the sudden reversal are soaring interest rates, inflation, a battered stock market and economic uncertainty.

Prices for luxury homes are still rising, though at about half the pace of a year ago, the report said. San Francisco’s median luxury sales price of $5,495,000 — the highest in the country — was up 14.5{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} over the same period last year. In No. 2 San Jose, the median $4,850,000 was up 12.5{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05}, and in No. 7 Oakland, the median $3,155,000 was up 21.3{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05}.

Such complicated market dynamics have all played a role in why the
mansion at 2698 Pacific Ave.
— the
fourth-most-expensive home
on the San Francisco market, according to Redfin — has gone unsold for so long, Chan said.

The 11,000-square-foot property was
listed for sale for $26.8 million in December 2019
— “on the precipice of (a) global pandemic,” Chan said. It was delisted in April 2020 before being relisted for $25.8 million in June 2021.

Despite the boom in luxury sales last year, the 30{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} increase in the high-end San Francisco market was only half the nationwide rate. Chan noted that a “large exodus” out of the city was a likely factor.

A
recent Chronicle analysis
shows the Bay Area lost many high-income earners during the pandemic, leading to the biggest drop in median household income between 2019 and 2021 among the most populous metros in the U.S.

The mansion’s price was lowered to $23.8 million in May — when mortgage rates were spiking over 5{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05} after starting the year around 3{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05}. The rate is
currently at about 7{30865861d187b3c2e200beb8a3ec9b8456840e314f1db0709bac7c430cb25d05}, and
more increases are expected.

While a buyer at the very top of the San Francisco market “isn’t as affected by rate hikes,” Chan said, that buyer is likely sensitive to the stock market, which has “taken a beating.”

“Affluent or not, people do not live in a bubble,” Chan wrote in an email. “Aside from the economy, the cultural mood has shifted too. Even if someone can afford this price tag, it’s a matter of consumer confidence.”

The Redfin report noted that many wealthy buyers still take out mortgages, sometimes as an investment strategy. For that reason, “High-end-house hunters are getting sticker shock when they see the impact of rising mortgage rates on paper,” said Redfin Chief Economist Daryl Fairweather.

Additionally, all-cash buyers who purchase luxury homes as investment properties may be shifting their money elsewhere — for example, to bonds, which may offer a better rate of return, the report said.

Chan said the luxury housing market has “definitely mellowed up.”

“We were drunk with appreciation and speculation last couple years (thanks) to pandemic mode,” with rates that were so low they were almost free, Chan said. “Now is the hangover.”

“We will be fine in the long run, but we (have to wait until the) hangover passes,” he said.

Chan remained hopeful about the Pacific Avenue estate, saying it has received “global exposure and consistent inquiries,” including proposals in the past. He also noted that a similar-size mansion two blocks away sold in July for $34.5 million.

For square footage, the home ranks No. 6 among the top 10 priciest in San Francisco, at $2,217 per square foot. The most expensive for both price tag and square footage is
3450 Washington Square, listed at $45 million, or $4,562 per square foot, according to Redfin.

While he wouldn’t divulge anything about the current owners, Chan said the family “wants to focus on their other home out of the area.”

Chan said the estate has continued to attract plenty of attention because of its prime location, opulence and luxury amenities — not to mention its rich history including a who’s who of famous San Francisco families.

It was originally built in the early 1900s by the renowned Newsom & Newsom architect team made up of Samuel and his son, Sidney, who were
ancestors of Gov. Gavin Newsom. The City Assessor’s Office lists the residence as built in 1906, though the
history section of the broker’s listing website
and multiple media date it to 1904.

The Classic Revival mansion, which features eight bedrooms and seven bathrooms, is known as the Mack House because it was originally built for financier Julius J. Mack and his wife, Irene “Nettie” Silverberg Mack.

Other previous owners included the Orrick family, who held the property for 50 years, and a prominent orthomolecular doctor, according to the listing.

Chan said the home features “lush history with timeless architecture,” with an elevator between the four floors. It has a 180-degree view of the San Francisco Bay, stretching from Marin to Berkeley. There is also a motor court in the rear.

In 2017, the home was featured in the
San Francisco Decorator Showcase, an interior design event that raises funds for San Francisco University High School’s financial aid program.

Kellie Hwang is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @KellieHwang