Median home prices climb and inventory tightens as high-earning tech buyers fuel activity across the Bay Area
It's always been a magnet for tech giants and startup founders chasing their dream of building the next big thing.
But while San Francisco's housing market has soared in recent decades because of the concentration of tech companies in the city, some say the AI boom – and a flood of new companies specializing in artificial intelligence – could bring that growth to a whole new level.
The city wasn't immune to the wider slowdown that gripped the national housing market when interest rates began climbing after 2023, but this year has seen activity shoot through the roof.
By spring, the median home sale price hit $1.7 million for the three months ending in May, a 16.1% year-over-year increase – with available housing supply dropping to just over 900 homes by the end of that month compared with 1,400 a year earlier.
A surge of high earners specializing in AI to the area has been viewed as one of the key drivers of that trend.
Tech wealth fuels aggressive bidding
Fif Ghobadian, senior vice president of mortgage lending at OriginPoint in the Bay Area, said that isn't necessarily anything new, but it seems to be accelerating this year. "We've always had that. We started with Yahoo, Google, Apple, and now we've got the AI companies," she told Mortgage Professional America.
"We've always had an influx of young people with a lot of income, and a lot of stock options and sign-on bonuses. So we certainly see a lot of that."
The clearest sign of AI money moving through the market is how aggressively buyers are pursuing homes once they find what they want, according to Ghobadian.
The purchasing power of buyers flush with cash means many are immune from the recent rate fluctuations that have driven homebuyers in some other markets to the sidelines.
That resilience mirrors a wider divide taking shape nationally, with sellers swamping buyers by nearly two to one in some markets. San Francisco remains among the tightest seller's markets in the country, a gap Redfin has tied largely to high-income tech buyers using salaries and equity that most other homebuyers can't match.
"What I have seen an increase of is more of these people putting offers on homes and kind of going crazy," she said. "They're definitely bumping up the prices, because there's a lack of inventory. So rate becomes secondary. The demand and low limited inventory and the affluence of the younger people in the market is what's driving everything."
Rates stay elevated, but buyers push through
Mortgage rates have been on the way up in recent weeks, due partly to a resurgence in oil prices as hostilities ramped up again in the US-Iran conflict. The central bank under chair Kevin Warsh has held its benchmark rate steady across multiple meetings this year despite a split committee stoking fresh rate-hike fears, leaving mortgage rates elevated heading into its late-July decision.
But many buyers in Ghobadian's area remain undeterred. "Because of the Bay Area having such a small space, the lack of inventory is the driving force here," she said. "Are rates having a negative impact? Certainly. Are they stopping people? No, they're not."
Plenty of buyers are opting for all-in offers. Others who are drawing on stock options and bonuses rather than fixed salaries, Ghobadian said, are choosing adjustable-rate mortgages to manage their monthly payments while they compete for homes, part of a broader trend of brokers turning to adjustable-rate mortgages as the pricing gap widens against 30-year fixed loans.
For buyers navigating a market this competitive – but who can afford to do so – Ghobadian's advice is to think beyond the immediate cost of financing. "You have to look past the rate conversation and look at the appreciation on the home," she said.
"A house is such a big investment. It's like an addition to your 401(k). If you look at the appreciation trend in your neighborhood, in your zip code, in your area, and focus on that, I think that's a better angle of looking at things than just rate."
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