With just weeks left until the San Francisco luxury goods market closes for the holiday season, dealerships say uncertainties about everything from the labor market to the stock market are causing inventory levels to soar and making it difficult for buyers to move offers. .
“There is an exponentially more inventory for high-end buyers to choose from, so we see a lot of buyers ‘walking around’ for weeks, but no one coming forward to write the offer,” Compass agent Missy Wayan Smit said via email. “We’ve seen this occasionally in the past, but not to this extent.”
The trend of slowing sales is not limited to luxury, as last month recorded the lowest volume of any October in more than a decade in San Francisco and the lowest volume since 2007 in the 11-county Greater Bay Area, according to Compass data. But sales of luxury homes in the Bay Area — those priced over $5 million — were hit harder than the rest of the market, with a 43% year-over-year decline, compared to 37% for the general market. The luxury homes, priced over $10 million, now have more than 11 months of inventory across the Bay Area, according to Compass. In San Francisco, there’s 17 months of inventory at this price point.
The city’s public housing market began to feel the impact of the interest rate increases in March, but it took until the stock market began to falter in May for the luxury real estate market to take a hit as well, according to Compass. As financial markets continued their bumpy ride in the fall, discerning buyers reacted to the roller coaster by pulling out of the market.
Compass agent David Billings said luxury buyers are feeling “less affluent than they were” in the spring. Their losses may not affect whether or not they can afford property worth more than $10 million, he said, but it is human nature to feel the need to save when faced with the onslaught of negative economic news.
“Everyone feels better about spending money when the market is going up,” he said.
Sotheby’s agent Deborah Svoboda recently listed a $35 million estate on San Francisco’s Gold Coast and said that “buyers definitely feel what’s going on in the stock market,” but “there are people who really want to be on those three blocks on Broadway and are willing to pay for it.”
The city has seen a $30 million boom and increase in sales this summer, including a $35 million off-market Gold Coast sale that could end up as the city’s biggest housing deal this year.
What is the value?
Given the erratic summers and quiet fall, it can be difficult for agents today to price high-end homes appropriately. For the home view on “Billionaire’s Row” in particular, the normal rules may not apply, said Patrick Barber, regional president of Compass.
Who knows what the value is [on those three blocks]?,” he said. “There are only so many houses on the north side of the street.”
Premium agents must also weigh what their clients want the home listed for, which is often more than the market can afford. Even if a listing agent can explain the compact to a client, Barber said, if the seller says his home must be worth millions more, many agents will give it a shot with the expectation that they can lower the price later.
“They’re shopping around to find a market,” he said of this year’s seven- or eight-figure price cuts. “You didn’t lose $10 million in value. It never had that much value.”
Agents often say that in a changing market, sellers look six months in the past and buyers look six months in the future, according to Smit.
“We’re trying to find the balance for today,” said Smit, who recently lowered the asking price of a Presidio Heights listing worth more than $10 million by $850,000. “When we need to make a price cut, we advise our customers to cut back by 5 to 10 percent, depending on how aggressive the original list price was. So while a $1 million reduction seems drastic, it is often within that range for high-end listings. “.
Not only do agents look at homes that have sold to find their company in a slow market, Smit said, but homes that aren’t selling as well.
“They tell us what the price point is too high, and we should price our menus more realistically,” she said. But the ground is changing, and it’s understandable that sellers don’t want to be test cases for finding the new normal. So it takes some time to find the new right place for pricing.”
Bellings expects the market to pick up again in the spring, in part because high-end sellers may take that long to come to terms with how they’ll price their homes and see enough other sales, or lack thereof, to believe it. Their home is no longer worth what it used to be. It’s a bitter pill to swallow if a home is listed too late to take advantage of the hot market earlier this year.
“I’ve had clients who’ve stopped for a few weeks and it’s hard,” he said. “But you can’t kick yourself for long.”
He hopes those newly disbanded sellers will meet up with New Year’s resolution buyers, who he said may have a psychological reset in mid-January when the first few post-holiday sales begin.
“It’s really herd mentality,” he said. “Now they are all at the edge of the pond, waiting for someone to jump in.”