San Francisco real estate gets super hot as AI boom creates new shortage

San Francisco’s housing market is going through a huge turnaround. It has gone from being a city synonymous with pandemic-era urban decline to the hottest housing market in the country.

The AI boom is responsible for this upturn in events. Rich employees at AI companies are pricing out move-in-ready homes to the point that all-cash offers of $25 million are seen as too low in the housing market right now.

From empty office spaces to 50-bidder open houses

San Francisco was a completely different place three years ago. The city lost over 60,000 residents from 2020 to 2022 as remote work surged due to the pandemic. The median sale price of a home was a lowly $1.28 million as of January 2023, a drop from its $1.68 million high the previous spring.

That slump has come to an end. The median home price has surged 25% over the past twelve months, and Paul Kitchen, a real estate agent, tells how certain listings have drawn up to 50 offers.

“You have to laugh just because it is so ridiculous and so beyond the pale,” Kitchen said, describing scenarios where top-end buyers offer $25 million in cash but still end up without a home.

Why AI money seems to be different

San Francisco has benefited from previous tech booms, but the AI boom is different in that it concentrates wealth in the hands of a few. Most AI companies in operation are yet to go public, so the money is in the hands of a narrow set of employees and investors.

The amount of paper wealth in play is huge. Current and former OpenAI employees could potentially own about $135 billion in post-tax equity if the AI firm IPOs at its expected valuation, with Anthropic’s employees adding ~ $63 billion more.

Both fortunes are worth almost 33% of San Francisco’s housing stock by value. Both OpenAI and Anthropic intend to list on the stock market, each leasing about 1 million square feet of office space in San Francisco in the last two years, and getting employees back into the office.

Renters and lower-income buyers are priced out

The pressure doesn’t end at the top, as young, highly paid tech workers are paying $10,000 a month in rent while some house listings get hundreds of inquiries in hours. The average price of rent in San Francisco has gone up by over $1,000 in a year to around $4,600, making San Francisco the most expensive rental market, just above New York.

Households on ordinary income have it worse. Based on a May 2026 analysis from Realtor.com and the National Association of Realtors, only 2.1% of March listings were affordable to a household bringing in $75,000 a year. That amounts to only 2,475 homes.

A tale of two tech hubs

The AI boom does not seem to be everywhere. Cities like Seattle have experienced a drop in house prices, with Seattle seeing prices drop 3.6% to $809,479 due to layoffs at Amazon and Microsoft.

Meanwhile, San Francisco’s July median sale price jumped 6% year over year to $1.6 million while active listings dropped 18.4%, the sharpest inventory drop in the country.

In Q1, the flow of home movers from San Francisco to Seattle fell to 369 people, down from more than 5,100 in 2021. “AI is reorganizing the tech labor market, with San Francisco and Seattle representing two sides of that transition,” Redfin economics research head Chen Zhao said.

What is San Francisco’s next step?

City officials are looking to boost the supply of houses. San Francisco passed the Family Zoning Plan into law in December 2025 to make space for denser housing in more neighborhoods. It also allows reforms and will help convert vacant office space into homes.

Office space had a 34.4% vacancy rate in late 2025. Whether that construction arrives fast enough to matter is the open question, with demand still outrunning the number of homes for sale.

If you're reading this, you’re already ahead. Stay there with our newsletter.