In a market that has reignited with AI-fueled wealth, San Francisco buyers who offer far above asking prices are still losing—while longtime luxury listings rebound from recent lows. The rebound is driven by extreme competition at the top end, tight housing su
In late January, Bill Law thought he had moved fast enough. He and his wife—longtime tech workers—submitted an offer on a $1.3 million home in San Francisco’s Sunset District, a west-side neighborhood known for good schools and easy access to the ocean and Golden Gate Park.
To stand out, the couple offered $300,000 above the asking price. They didn’t come close. The winning bid landed at $1.86 million, easily eclipsing their offer.
“I definitely feel the frustration in the real estate market,” Law told me. “Since January, it’s just — it took off like a rocket.”
For buyers like Law, the market doesn’t just feel expensive—it feels like it’s accelerating beyond their reach. Some homes in San Francisco now trade for millions of dollars above their asking prices. and neighborhoods once viewed as less glamorous backdrops for the money chase—like the Outer Sunset and Outer Parkside—are drawing “truly unhinged pricing contests.”.
No major city has seen home values rise faster over the past year, helping the San Francisco metro reclaim its title as the most expensive housing market in the country.
The change is stark enough that it comes with a new kind of urgency. When one agent began warning buyers to lock in before the next wave of AI money hit harder, the message wasn’t subtle.
“It’s last call for everybody,” Monica Pauli, a real estate agent and 25-year veteran of San Francisco’s real estate scene, said in September. “You have to buy before 2026.”
Pauli has watched the rebound gather speed at the high end. and she began pushing that timeline after one of her listings—an example that has stayed with her—sold quickly for far above what buyers expected. In September, a four-bedroom home in Asbury Heights sold for $1 million above its $4 million asking price.
Before this rebound, San Francisco had already lived through a collapse that made national headlines. In the depths of the housing slowdown in 2022 and 2023. Bay Area home prices slid in a “doom loop” as newly mobile white-collar workers moved away to cheaper cities such as Austin or Denver. Census Bureau data shows the city’s population shrank by more than 60,000 people.
Now the city is bouncing back—fast—and the latest turn in its housing odyssey is tied to AI fortunes. The current AI-fueled bonanza is notable for its concentration of extreme wealth and the speed at which it’s minting new fortunes. With a wave of IPOs looming—including OpenAI. SpaceX. and Anthropic—overnight millionaires and billionaires are expected to deliver more shocks in the coming months.
The turnaround is also happening while San Francisco has struggled, for years, to build enough homes. That imbalance shows up in the inventory numbers.
In the spring of 2023, Compass data shows fewer than 400 single-family homes were available for sale in the city. Today, there are only 250 or so.
That tight supply collides with a new set of buyers: workers pulled to the Bay by the promise of multimillion-dollar bonuses. fat equity packages. and lavish salaries. In Mike Simonsen’s view, the transformation goes beyond the household names. Simonsen—chief economist for Compass International Holdings and a longtime San Francisco resident—said the Bay is also attracting “a lot of companies you’ve never heard of that are worth $100 billion or something.” He added. “I have friends in their 30s who are suddenly billionaires.”.
The migration pattern mirrors the shift in who is arriving and who is leaving. An analysis of migration data by John Burns Research and Consulting found that San Francisco recently notched its first month of positive net domestic in-migration—more households moving in from other parts of the country than moving out—since at least 2018.
Austin emerged as a popular destination for Bay Area expats in 2020. Over the past year, though, more households moved from Austin to San Francisco than the reverse.
The speed of change is also reshaping behavior among buyers themselves. Paul Hwang—an agent who specializes in South Beach—described how the new wealth is translating into buying power.
“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,” Hwang said. “And the Ferrari is literally the house in Noe Valley or the penthouse in South Beach.”
That comparison captures a market logic now visible in luxury neighborhoods. San Francisco’s metro already has the highest price growth of any major metro in the country. with prices up nearly 11% year over year. per Redfin data. Within San Francisco city limits. prices are up 15% from a year ago. and the growth is coming mostly from the top end.
Fairweather—chief economist at Redfin—said prices are up 13.4% since 2022 in “luxury” neighborhoods, defined as ZIP codes where the typical home price exceeds $3 million.
With luxury buyers dramatically outweighing available inventory, competition has become fierce even for fixer-uppers. Victoria Stewart Davis. an agent who has worked across San Francisco for more than two decades. said. “People are willing to do a lot of work. They’re willing to buy something for $8.2 million and spend another $8 million renovating it.”.
Yet the frenzy has not spilled into the entry-level market the same way. Agents and economists say prices are down 4% in ZIP codes with homes in the half-million-dollar range.
Fairweather said the “AI part is important” in explaining the divergence between luxury and non-luxury.
“At the top end of the market, the madness is often by design,” Pauli said. Sellers’ agents price homes well below market value “to get buyers through the door,” she explained. “Then the market will speak.”
That strategy can mean a final sale that ends up about a million dollars over the asking price—or it can mean a buyer ultimately pays double the listed amount. Pauli pointed to a six-bedroom home in the Cow Hollow neighborhood that recently sold for $15 million—nearly twice its $7.95 million asking price.
“The pricing strategy, it worked,” Pauli said.
For other agents, the biggest shock has been how broken standard valuation tools can feel under the new bidding behavior. Michael Williams, an agent at TurboHome, said “comps,” or comparable sales used to estimate market value, have been rendered meaningless. Williams said he now focuses on calling agents with pending sales to get up-to-the-minute insight on what homes are going for.
He described a bidding war that “broke his brain”: a house in Bernal Heights where a winning offer came in at $2 million—$400,000 higher than the second-place bid.
“We are seeing, I think, a little bit of a disconnect from reality,” Williams said.
Alan Mark, a longtime Bay Area real estate consultant, traced that disconnect to how bidding works when the richest buyers are emotionally invested.
“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. ” Mark said. “That’ll really get people going. They got emotionally involved, and they lost. They go in a third time, and there’s no way they’re going to lose.”.
San Francisco’s supply problem makes it unlikely that this kind of competition will cool quickly. Even if not every AI winner chooses to buy. those who do will likely target the same types of homes already drawing the stiffest competition: move-in-ready. standalone places that can accommodate growing families and offer attractive commutes for those who still want to be in the city.
Simonsen compared the current moment to the dot-com era. He moved to San Francisco in January 1999, when the city was in the throes of the dot-com boom. He said the situation feels comparable. but the gold rush now is concentrated among a smaller number of companies that are doing “really remarkable things.”.
The unevenness of the rebound in San Francisco—super hot at the luxury end and lukewarm in the “affordable” segment—is also being seen nationwide. Fairweather described it as part of a K-shaped economy. in which lower earners are being hammered by inflation while high earners weather it as their investments swell. He added, “At a national level, it’s reflective of how the AI economy is not making everybody equally rich.”.
For buyers on the outside, that divide shows up as instability and stress. Mark said longtime San Franciscans worry about destabilizing effects of rapid price run-ups. and that “nobody wants to see rents or prices shoot through the moon.” Even those who can afford it are rethinking how far their money will go.
Law, the buyer who lost out on the $1.86 million Sunset District home in late January, eventually did secure a property. In March, he closed on a three-bedroom home in that same neighborhood after weeks of searching. He said. “Whatever came out that met our criteria. we went and looked at it.” He added that there was “hardly any homes.”.
At open houses in popular neighborhoods, Law described crowds so intense that hopeful buyers found themselves shoulder-to-shoulder. “Literally shoulder to shoulder,” he said, “like you’re at Disneyland on Thanksgiving or Christmas.”
The home Law ultimately bought never reached that public stage. Law and his agent put in an offer before the seller hosted an open house, aiming to secure it ahead of more interest. The seller was on a tight timeline, and they worked out a deal.
To reduce costs elsewhere, Law enlisted TurboHome. TurboHome charged him a flat fee of $20,000 rather than the typical agent’s fee of 2%–3% of the sale price, which he said would have been “tens of thousands of dollars more” in his case.
Law asked that the final price not be disclosed. He said he ended up paying $1,200 per square foot—well above the $900 per square foot he bid on the first home.
“It was definitely an eye-opening experience,” Law said.
For many people buying right now, the market’s next phase is already arriving in the calendar—through expectations that IPO fortunes will spread, and that competition will intensify further. Pauli framed it in the simplest possible terms: buy before 2026.
The relief for some real estate practitioners is that the city’s conversation has shifted away from the “doom loop.” Pauli said, “I think we’ve been undervalued for a long time. It’s really nice to see our city bounce back.”
Still, practitioners warn that the numbers aren’t likely to return to their prior balance anytime soon. In a city where only a few hundred single-family homes are typically for sale, a surge of newly flush tech workers doesn’t just lift prices—it forces an argument over who gets in, and how fast.
San Francisco housing market AI economy home prices IPOs Redfin Compass migration data real estate inventory luxury neighborhoods TurboHome