San Francisco’s housing market has gone insane

Real estate in San Francisco has never been easy to access. But the record sales currently occurring in the city’s luxury market are testing the limits of what was thought possible even in this notoriously unreachable city.

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

San Francisco real estate agent Rohin Dar flagged a sale at X, drawing the expected reaction from people who thought they had seen everything this market had to offer.

Next, a 4,100-square-foot home in Presidio Heights, one of the city’s most exclusive enclaves, was listed for $4.4 million in late April and sold a week later for $8.2 million, nearly double the asking price. Venture capitalist Nicole Wischoff, who toured the property before the sale, was not impressed with what the money could buy.

“Mediocre house, good location,” she wrote to X, noting that the view from the patio was of the house next door that appeared to have burned down. “Someone just bought this for $8.2 million,” she wrote. “If you want to see cash burn, come on a San Francisco real estate tour.”

It’s not just ultra-high-end companies that are taking action. A 2,300-square-foot home in Bernal Heights sold this week for $4 million, $1 million more than the asking price, just two years after the same owner tried and failed to sell for $2.95 million. This sale represents a different but equally telling story. This craze isn’t limited to the rarefied 8-figure home crowd. Buyers are bidding aggressively across a wide swath of the market, and homes routinely sell for $500,000 to $1 million above asking price.

The numbers support the anecdote. Luxury home sales in San Francisco rose 22% in March compared to the same month last year, and homes were under contract for a median of just 12 days, down from 28 days a year earlier, according to new data from Redfin. Nearly two-thirds of luxury properties go under contract within two weeks. In contrast, sales of non-luxury goods increased by less than 4% and prices remained roughly flat. The high end essentially operates in a completely different world.

The invisible forces behind all this are no mystery to anyone paying attention to the city’s tech economy. San Francisco is home to some of the world’s most valuable private companies, and its employees are secretly accumulating wealth and increasingly cashing it out.

OpenAI and Anthropic, two of the most valuable AI companies ever founded, have in recent years allowed their employees to sell some of their shares in secondary market transactions, often putting large sums of money into the hands of people who already live here and want to upgrade. That liquidity is flowing directly into the housing market, and the market is reacting accordingly.

The truly amazing part may still be ahead. SpaceX, OpenAI, Anthropic and other tech giants have yet to go public. When they do, and conventional wisdom holds that some of them will sooner or later, when that wealth is unleashed, the current moment may seem quaint. Almost overnight, thousands of employees who own stock in companies worth hundreds of billions of dollars will become even more liquid.

What that means for the housing market, which has already generated $15 million in sales after just over a week on the market, is frankly hard to fathom at this point. San Francisco has spent decades as a focal point in the housing affordability debate. It would be strange, to say the least, if $15 million immediately seemed like an opening price.