San Francisco’s housing market has lost its mind

Real estate in San Francisco was never available. But the record sales happening now in the city’s upscale market are testing the upper limits of what even this famously unaffordable city thought was possible.

Consider a six-bedroom, 5,700-square-foot home in Cow Hollow, one of San Francisco’s most desirable neighborhoods. It was listed two weeks ago at $7.95 million, so it’s not cheap. It just sold for $15 million. The sellers, who bought the property for $7.8 million in the summer of 2020 as the pandemic was pushing residents out of cities, have nearly doubled their money in less than six years.

San Francisco real estate agent Rohin Dhar put the for sale sign on the X, attracting the kind of reaction you’d expect from people who thought they’d seen everything this market had to offer.

Then there’s a 4,100-square-foot home in Presidio Heights, one of the city’s most exclusive areas, which was listed in late April for $4.4 million and sold a week later for $8.2 million, nearly double the asking price. Venture capitalist Nicole Wischoff, who toured the property before selling it, wasn’t impressed with what the money was buying.

“Modest house, good location,” she wrote on X, noting that the view from the yard was of a neighboring house that appeared to have burned down. “Someone bought this for $8.2 million,” she wrote. “If you want to see money burning, come to San Francisco real estate.”

It’s not just the super high end that sees action. A 2,300-square-foot home in Bernal Heights sold this week for $4 million — $1 million more than asking — just two years after the same owners tried and failed to sell it for $2.95 million. This sale represents a different but equally telling story: The frenzy isn’t limited to the rarefied tier of eight-figure homes. Across a wide swath of the market, buyers are making aggressive bids, with homes routinely selling for $500,000 to $1 million more than asking.

The numbers support the stories. New data from Redfin shows that luxury home sales in San Francisco jumped 22% year-over-year in March, with homes going under contract in an average of just 12 days — down from 28 days a year earlier. Nearly two-thirds of luxury properties were under contract within two weeks. By contrast, non-luxury sales rose less than 4%, with prices essentially flat. The top end basically operates in a completely different world.

The hidden power behind all this is no mystery to anyone interested in the city’s tech economy. San Francisco is home to some of the world’s most valuable private companies, and their employees have been quietly accumulating, and increasingly spending, their wealth.

OpenAI and Anthropic, two of the most valuable AI companies of all time, have allowed employees to sell portions of their shares in secondary market transactions in recent years, putting a lot of money into the hands of people who in many cases already live here and want to upgrade. This liquidity flows directly into the housing market, and the market responds accordingly.

The truly amazing part is probably still to come. SpaceX, OpenAI, Anthropic, and a host of other tech giants have yet to go public. And when they do – and conventional wisdom suggests that some of them will, sooner rather than later – the liberated wealth may make the present moment seem quaint by comparison. Thousands of employees who own shares in companies worth hundreds of billions of dollars will become more liquid almost overnight.

What that means for a housing market that’s already producing $15 million in sales within just a week or so of its listing is frankly hard to fathom at this moment. San Francisco has spent decades as a centerpiece of conversations about housing affordability. It would be strange, to say the least, for $15 million to soon seem like an opening bid.