AI Money Is Pricing Ordinary Buyers Out of San Francisco

The San Francisco housing market has gone from doom loop to bidding-war chaos in barely a year, and the people getting steamrolled are the ones who used to be able to afford it. Bill Law, a longtime tech worker, put $300,000 over asking on a $1.3 million home in the Sunset District this January. The winning bid topped $1.86 million. He didn’t come close.

Prices across the metro are up 14.4% over the past year to a record median near $1.7 million, the biggest jump of any large US metro, according to the brokerage Redfin. The surge is almost entirely an AI-wealth story, and it is carving the city into a luxury tier where buyers throw millions over asking and an entry-level tier that ordinary families still can’t crack.

Half a Million Over Asking, and Still Not Enough

Offering well over the list price used to be a tactic. Now it’s the floor. By Compass data, more than half of the city’s homes now sell above asking, by far the highest share of any major US market, with Chicago a distant second near 30% and the national rate just above 16%. Redfin found San Francisco prices jumping the most in eight years amid the AI boom, with condos alone climbing 24.4% in a year.

The headline sales sound made up. A six-bedroom home in Cow Hollow recently sold for $15 million, nearly twice its $7.95 million list. A newly built seven-bedroom place on the Presidio Wall went for $13.5 million, about $1.5 million over asking. “I’ve never seen a market like this,” says Monica Pauli, a San Francisco real estate agent with 25 years in the business.

When Comps Stop Working

Recent sales, or “comps,” are the tool agents normally use to price a listing. Several told reporters those numbers are now meaningless. Michael Williams, an agent at the brokerage TurboHome, says he spends his days phoning agents with pending deals just to learn what homes are actually fetching that week.

“We are seeing, I think, a little bit of a disconnect from reality,” Williams says. One Bernal Heights house his client chased closed at $2 million, a full $400,000 above the second-place bid.

One House, the Whole Cycle

No single property tracks San Francisco’s six-year ride better than a Mediterranean Revival home at 2626 Larkin Street, atop Russian Hill with bay views and a 1,000-bottle wine cellar.

1. January 2020: sold for $20 million at the pre-pandemic peak.
2. Late 2023: traded again for $10 million, a 50% discount during the slump.
3. April 2026: sold for $24 million, recovering everything it lost and then some.

Where the Money Is Coming From

San Francisco is the undisputed center of the AI industry, home to OpenAI and Anthropic plus a long tail of startups most people have never heard of that already carry nine- and ten-figure valuations. Those firms are recruiting with multimillion-dollar equity packages and signing bonuses big enough that one Redfin agent described 22-year-olds arriving with $500,000 just to say yes.

Paul Hwang, a San Francisco real estate agent who works the South Beach neighborhood, says the spending follows the grind.

When they work so hard, 9 A.M to 9 P.M., six days a week, they’re going to feel entitled to go buy the Ferrari. And the Ferrari is literally the house in Noe Valley or the penthouse in South Beach.

The population math has flipped, too. Through the pandemic the metro shed more than 3% of its residents, and the city lost over 60,000 people as white-collar workers fled to cheaper cities. John Burns Research and Consulting, a housing research firm, recently logged San Francisco’s first month of positive net domestic in-migration since at least 2018. Over the past year, more households moved from Austin to San Francisco than the reverse. “People said that the Bay Area was dead,” says Daryl Fairweather, chief economist at Redfin. It wasn’t. The city is again the most expensive major metro to buy in, per San Francisco’s housing market data, having retaken the title from neighboring San Jose.

A Market Splitting in Two

Here is the part most national coverage skips. The boom isn’t lifting the whole city. It’s lifting the top. Fairweather’s read of the data shows prices in luxury ZIP codes, where the typical home runs above $3 million, up 13.4% since 2022, while entry-level areas around the half-million mark are down about 4%. Redfin separately counted luxury home sales jumping as the median neared $7 million.

Competition is so fierce that even tear-downs draw blood. “People are willing to do a lot of work,” says Victoria Stewart Davis, a San Francisco real estate agent of more than two decades. “They’re willing to buy something for $8.2 million and spend another $8 million renovating it.” The richest buyers can stomach a bidding war; everyone else faces the same high rates and thin supply that have frozen buyers across the country.

Why San Francisco Can’t Build Its Way Out

All that demand is crashing into a city that simply does not build. Even in the down years, single-family inventory was tight. Compass data showed fewer than 400 such homes for sale in spring 2023. Today there are fewer than 250 single-family homes on the market across the entire city.

• Under 250 single-family homes listed citywide right now.
• Roughly 3% of metro residents left between 2020 and 2022, a hole now refilling fast.
• 14.4% annual price growth, the largest of any major US metro.

This isn’t only a San Francisco problem. The country has under-built for a decade, which is part of the logic behind Berkshire Hathaway’s $8.5 billion bet on homebuilder Taylor Morrison. In San Francisco the constraint is acute: a city offering a few hundred homes at any moment cannot absorb thousands of newly cash-rich workers without prices going vertical.

The Buyers Getting Squeezed Out

The losers in this market are the merely well-paid. Bill Law kept searching after that January defeat, looking at almost anything that fit his criteria because, as he put it, there was “hardly any” inventory. At open houses he stood “shoulder to shoulder” with rival buyers, he says, like a theme park on a holiday weekend.

What Winning Now Costs

Law finally closed on a three-bedroom Sunset home in March, getting an offer in before the seller held a public open house. To save on fees he used TurboHome, which charged a flat $20,000 instead of the usual 2% to 3% commission. He asked that the final price stay private but said he paid about $1,200 per square foot, up sharply from the roughly $900 he’d bid on that first lost home. The city’s typical home value had fallen more than 17% from its 2022 peak to its 2024 trough, Zillow’s home value data shows, which makes the speed of this rebound all the more jarring.

The Same Split, Nationwide

What’s happening here is the K-shaped economy in miniature. “At a national level, it’s reflective of how the AI economy is not making everybody equally rich,” Fairweather says. High earners ride swelling investments while lower earners absorb inflation and high rates. The squeeze isn’t a coastal curiosity either; hundreds of residents packed a Colorado housing meeting over the same affordability fears that grip the Bay.

And once buyers lose a few times, the price stops being a calculation. “Many people with really deep pockets, it really doesn’t make a difference to go $5 million, $10 million above asking, especially if they missed out on a home or two,” says Alan Mark, a Bay Area real estate consultant. “They got emotionally involved, and they lost. They go in a third time, and there’s no way they’re going to lose.”

What the IPO Wave Does to Prices Next

Agents think the wild part hasn’t started. A run of giant listings is forming, and each one promises to turn paper equity into cash that lands in the same few neighborhoods. Pauli began telling clients last fall to move fast: “I told them, you have to buy before 2026.”

• SpaceX: roadshow reportedly beginning in early June, with a listing targeted around June 12 and only about 4.3% of shares floating at first.
• OpenAI: an IPO as early as September, after an $852 billion valuation surfaced in March.
• Anthropic: targeting as early as October, with Goldman Sachs, JPMorgan and Morgan Stanley lined up to underwrite.

Lockups will keep most of that wealth on paper for months after each debut, so the full force won’t hit the housing market on day one. When it does arrive, it will chase exactly the move-in-ready, single-family homes already drawing the stiffest fights. For now, the people who were quickest to call San Francisco dead look the most wrong. “I think we’ve been undervalued for a long time,” Pauli says. The market’s next test arrives with the opening bell on June 12, and the IPO calendar runs straight through the fall.

Disclaimer: This article is for informational purposes only and is not financial, investment, or real estate advice. Housing prices, IPO timing, and valuations carry risk and can change quickly; consult a qualified professional before making any property or investment decision. Figures are accurate as of publication.