The surge in artificial intelligence activity in the Bay Area is impacting San Francisco’s real estate market, particularly at the high end. As more AI executives and employees relocate to the city, demand for luxury homes has increased, leading to a shortage of available mansions, according to a report by the San Francisco Chronicle.
Properties that previously lingered on the market are now selling quickly. A 5,000-square-foot mansion in Pacific Heights recently went into contract for about $9.4 million—the same price it fetched eight years ago—but this time an offer was made on the first day at full price. “It was a difficult house at the time,” said Peter Rodway, senior partner at Neal Ward Properties who handled both sales of the Jackson Street home. “This time, buyers were just banging at the doors to get into it. An offer came in on the first day, at full price.”
AI startups’ growth and cashing out of stock options are fueling demand among well-paid tech workers returning to San Francisco. Gregg Lynn, a luxury agent with Sotheby’s International Realty, commented: “The future wealth in AI is out and touring homes right now. Some of them are touring $2 million condos. Some of them are touring $20 million houses. That wealth effect is going to continue to help drive demand.” Rodway added: “The city is just flush with cash right now — and there’s not enough inventory to keep up with it.”
Data from Redfin shows that sales for luxury homes have risen 14 percent year-over-year in San Francisco while inventory has dropped by approximately 4.5 percent over the same period.
Overall home sales from June through August rose by 4.2 percent compared to last year, and September saw an even larger increase—total home sales were up 35 percent year-over-year.
San Francisco stands out as the only county in the Bay Area with a year-over-year rise in its pending ratio—a measure comparing housing demand versus supply.
“San Francisco’s pending ratio leapt higher by 15 percentage points, an enormous rise. We ascribe the large shifts in the market to its rapidly accelerating AI startup boom,” said Patrick Carlisle, chief market analyst at Compass. He noted that October could see even more activity since it is typically strong for closed luxury sales; currently there are 15 pending sales of homes priced above $5 million expected to close this month.
CBRE forecasts that more than 50,000 tech workers will move to San Francisco by decade’s end due to AI sector growth.
— Chris Malone Méndez
