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San Francisco’s ultra-rich are renting more than ever, but buying is coming back en vogue

High interest rates sidelined the majority of luxury buyers and sellers for 18 months.

A woman stands in a bright room near an open door, with outdoor seating visible outside and modern decor inside.
Nina Hatvany, one of San Francisco's most prominent luxury brokers said rents soared last year because fewer people wanted to commit to new mortgages. | Source: Jason Henry for The Standard

The three-bedroom, five-bathroom townhouse at 115 Telegraph Hill Blvd. sits at the foot of the last set of stairs that rise to meet Coit Tower’s colossal art deco facade. 

Outside of its prime location, the multistory residence with an internal elevator offers a stunning roof deck with panoramic views spanning the Bay Bridge to the Golden Gate and all the iconic landmarks in between. 

Particularly considering the neighborhood’s near-militant efforts to protect those vistas and keep development out, the newly built home is a chance for a member of the ultra-elite to own a rare, elevated slice of San Francisco. 

Instead of finding a buyer, however, the property ended up being rented for $26,250 a month by an out-of-town couple near the end of last year. 

Compass broker Inna Rubinchik—who specializes in luxury rentals under the moniker “Leasing Agent 415”—closed out her most successful year ever in December by leasing out 115 Telegraph Hill Blvd. alongside two of its adjacent sister properties, all at rents over $25,000 a month. 

The three properties were put up for sale in 2022 for prices ranging from $12 million to $15 million, but the dearth of buyers meant no sales were made, even after multimillion-dollar price drops.

Modern buildings with large windows amid trees; city skyline in the distance.
These three newly built luxury townhomes on Telegraph Hill languished on the market for over a year, but when they switched to rentals, they were snapped up in short order. | Source: Jason Henry for The Standard

The luxury homebuying market has been in a chill compared with the frenzied pace set in 2021. Rising interest rates have meant a pullback by buyers and correspondingly lower asking prices from sellers. 

With sellers loath to take a loss, inventory—typically low even in the best of times—has largely been throttled. 

So the ultra-rich have increasingly decided to test the high-end rental market over the past year and a half. 

The profile of ultra-wealthy renters varies, but Rubinchik said, generally they work in tech, venture capital, private equity or hedge funds. Over her 15-year career, she found that working couples (think DINKs: double income, no kids) or young families tend to pay the highest rents.

The owners of these sorts of properties, on the other hand, have found themselves in a situation where renting has recently become more economically viable as would-be buyers are stuck on the sideline because of interest rates. 

“The majority of owners who bought in the last decade would prefer to sell,” Rubinchik said. “But right now, it doesn’t make much sense to do so unless you absolutely have to.” 

As a result, the luxury home market swung toward flexibility as opposed to outright ownership.

“People just didn’t want to commit,” said Nina Hatvany, a major luxury real estate broker who has sold more than $4 billion in luxury properties during her career.  “And it kicked off this whole cycle that ended up driving up rental prices.” 

From ‘Roaring Twenties’ to pricing crash 

While much was made about a pandemic exodus from the city, the ultra-rich still want to live in San Francisco. 

“I think they’re realizing that they’re bored out in the suburbs and there was a reason why so many had residences here in the city,” Hatvany said. 

Hatvany cited big-money enthusiasm for moderate causes in the upcoming elections as evidence of a pivot point showing people are “tired of the doom loop narrative.” 

Cityscape with a tower on a hill, tiered buildings in the foreground, and skyscrapers in the distance under a clear sky.
Views of the Coit Tower, Transamerica Pyramid and Salesforce Tower are visible from the rooftop of 55 Child St. in Telegraph Hill, where Nina Hatvany is listing a luxury condo for sale. | Source: Jason Henry for The Standard

Still, the market is a far cry from 2021, when sales of homes over $5 million exploded, surpassing any previous year on record, according to an analysis by Compass Real Estate. 

That year, nearly 200 luxury homes traded hands in San Francisco. In the nine years before that, throughout the majority of the tech boom, the city averaged less than half that number.

“Once the vaccinations started, it was like the Roaring Twenties,” said Gregg Lynn, a top luxury real estate agent at Sotheby's International. “We had two years' worth of sales jammed into nine months.” 

According to Lynn, the majority of those moves were made by wealthy individuals already living in the city, who were either looking to upgrade into larger homes or different neighborhoods with more open space after months of tight lockdown. 

Soon after, a perfect storm of global conflict, interest rate hikes to tamp inflation and the sudden collapse of major regional banks gave way to the worst year in total home sales since the Great Recession. 

Lynn, who doesn’t specialize in rentals but helps lease some properties for his clients, said an increasing number have turned to rentals for limited cash flow as buyers at preferred price points dried up. 

Last month, Lynn finally sold a four-bedroom, six-bathroom penthouse at 2000 Washington St. in Pacific Heights that had been on and off the market for several years.  

A large, traditional house with a gabled roof and a street corner with a pedestrian walking by.
A seven-bedroom, four-bathroom home at 2400 Broadway in Pacific Heights. Luxury home sales were significantly down after interest rates spiked in the middle of 2022. | Source: Jason Henry for The Standard

According to public records, the Pacific Heights property traded hands for $16 million, the same price it sold for nearly a decade ago. 

That is a common trend line, particularly at the super high end of the market. A Presidio Heights estate at 3630 Jackson St. saw its asking price drop by 20% from $36 million to $29 million in less than six months last year.

Getting back to buying

However, it’s not all doom and gloom for those looking to sell, as signs point to a reprieve in the coming months.

Although sellers continue to be pinched via declining home prices, more buyers are starting to emerge from the sidelines now that they have more clarity on future market conditions, Lynn said. 

“I think there’s a sense that there’s no more bottom,” Lynn said. “People can see a future where they can successfully refinance down the line, so now it’s more about just finding the right home.”

With federal officials signaling that interest rate cuts are coming, there’s a growing consensus amongst the wealthy elite that San Francisco is reaching a turning point. According to Compass data, luxury home sales last month were up 70% compared with the same period last year. 

Lynn said in the eight weeks after Federal Reserve Chair Jerome Powell made his December announcement about likely interest rate cuts in 2024, his team closed more sales than they had in the previous five months combined. 

A bright living room with two people sitting on a couch, modern decor, ample lighting, and large mirrors on the wall.
Nina Hatvany, right, and her son, Paul Kitchen, left, real estate agents with Team Hatvany, sit inside the living room at 55 Child St. The luxury condo was fetching nearly $8,000 in monthly rent before its owners decided to sell this year. | Source: Jason Henry for The Standard

Last month, Kevin Hsu and his partner moved into a 1,700-square-foot, three bedroom, two bathroom house they bought in Forest Knolls. The couple, who both work in tech, were renting until they came across a deal that was “too good to pass on.” 

Hsu said the price and amount of space they got in their new home was better than anything they could have rented. 

“We’ve always known we would buy here and stay at least until we weren’t as career-oriented,” Hsu said. “It hasn’t ever really been a question on whether we should leave San Francisco.” 

Lynn said his email inbox is evidence of this comeback.

“People who were supposed to be at Christmas parties [last year] were instead on Zillow,” Lynn quipped.