Bay Area is leading a record decline in luxury home sales. This SF mansion illustrates the problems of the market – San Francisco Chronicle | NutSocia

A historic San Francisco mansion that went up for sale just before the pandemic is still struggling to find a buyer — an example of a dramatic turnaround in the Bay Area’s luxury housing market, which just posted its lowest September sales volume in at least one The year-on-year decline recorded in the decade is double the record decline seen in the rest of the country.

And the outlook for the rest of the year is bleak, according to one of the brokers for the Pacific Ave property. 2698, just off Billionaire’s Row in Pacific Heights. “Many brokers are quietly exiting the rest of 2022,” said Herman Chan of Golden Gate Sotheby’s International Realty.

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

September sales in the luxury market in all three major Bay Area metro areas — San Francisco, Oakland and San Jose — hit their lowest levels for the month since listing site Redfin started keeping records in 2012, theirs said analysts. Redfin defines luxury properties as those in the top 5% based on market value.

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

The severe downturn wasn’t just limited to the Bay Area: The number of luxury homes sold nationwide in the three months ended August fell 28.1% from the same period last year, according to a Redfin report.

The drop far surpassed a record 19.5% year-over-year drop in non-luxury home sales and was the largest since at least 2012 — a dramatic swing from the record 61% surge in luxury home sales seen from 2020-2021.

Sales of high-end homes in the Bay Area have been hit the hardest. The Oakland metro area saw the largest year-over-year decline in luxury home sales among the 50 most populous U.S. metropolitan areas, down 63.9%, Redfin data showed. Greater San Jose followed with a 59.6% decline. San Francisco was 7th with a 49.6% decline.

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 pulled out, the report said. The driving forces behind the sudden turnaround are rising interest rates, inflation, a battered stock market and economic uncertainty.

Luxury home prices are still rising, albeit at half the rate of a year ago, the report said. San Francisco’s median luxury retail price of $5,495,000 — the highest in the country — rose 14.5% from the same period last year. In No. 2 San Jose, the median was up 12.5% ​​to $4,850,000 and in No. 7 Oakland, it was up 21.3% to $3,155,000.

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

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

Mansion in SF Bay Area is symbolic of record drop in luxury home sales.  This mansion at 2698 Pacific Ave.  in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

Mansion in SF Bay Area is symbolic of record drop in luxury home sales. This mansion at 2698 Pacific Ave. in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

Courtesy of Herman Chan, Sotheby’s International Realty

Despite last year’s boom in luxury sales, the 30% increase in San Francisco’s high-end market was only half that of the nation as a whole. Chan noted that a “major exodus” from the city is a likely factor.

A recent Chronicle analysis shows that the Bay Area lost many high-income people during the pandemic, resulting in the largest decline in median household income among the US’s most populous metro areas between 2019 and 2021

The mansion’s price was slashed to $23.8 million in May — as mortgage rates rose about 3% to over 5% from the start of the year. The rate is currently around 7%, and further increases are to be expected.

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

“Wealthy or not, people don’t live in a bubble,” Chan wrote in an email. “In addition to the economy, the cultural mood has also changed. Even if someone can afford that price, it’s a question of consumer confidence.”

The Redfin report found that many wealthy buyers are still taking out mortgages, sometimes as an investment strategy. Because of this, “high-end home seekers get sticker shock when they see the impact of rising mortgage rates on paper,” said Redfin chief economist Daryl Fairweather.

This mansion at 2698 Pacific Ave.  in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

This mansion at 2698 Pacific Ave. in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

Courtesy of Herman Chan, Sotheby’s International Realty

Additionally, cash buyers buying luxury homes as investment properties could shift their money elsewhere — for example, into bonds that may offer a better yield, the report says.

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

“We’ve been drunk on appreciation and speculation for the past few years (thanks to) the pandemic mode,” Chan said, with interest rates so low they were almost free. “Now the hangover.”

“We’ll be fine in the long term, but we (have to wait for the) hangover to pass,” he said.

This mansion at 2698 Pacific Ave.  in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

This mansion at 2698 Pacific Ave. in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

Courtesy of Herman Chan, Sotheby’s International Realty

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

In terms of square footage, the home ranks sixth in the top 10 most expensive in San Francisco at $2,217 per square foot. The most expensive for both price and square footage is 3450 Washington Square, which is listed at $45 million, or $4,562 per square foot, according to Redfin.

Though he didn’t want to reveal who the current owners were, Chan said the family “wanted to focus on their other home outside of the area.”

Chan said the property has continued to draw a lot of attention for its prime location, opulence, and luxe amenities — not to mention its rich history, including a who’s who of famous San Francisco families.

This mansion at 2698 Pacific Ave.  in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

This mansion at 2698 Pacific Ave. in San Francisco was originally built in the early 1900s by renowned architectural team Newsom & Newsom and remodeled as part of the 2017 San Francisco Decorator Showcase.

Courtesy of Herman Chan, Sotheby’s International Realty

It was originally built in the early 1900’s by the renowned architectural team Newsom & Newsom, consisting of Samuel and his son Sidney, who were ancestors of Governor Gavin Newsom. The City Assessor’s Office lists the residence as built in 1906, although the history section of the agent’s listing website and several media outlets date it to 1904.

The eight-bedroom, seven-bathroom Classic Revival mansion 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 owned the property for 50 years, and a prominent orthomolecular doctor, according to the listing.

Chan said the home has “a rich history with timeless architecture,” with an elevator between the four floors. It has 180 degree views of the San Francisco Bay stretching from Marin to Berkeley. There is also a motor yard in the stern.

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

Kellie Hwang is a contributor to the San Francisco Chronicle. Email: kellie.hwang@sfchronicle.com Twitter: @KellieHwang

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