AI boom heats up Bay Area housing market as wealthy

What happened

High-income earners, many of them employees at AI companies, are snapping up multimillion-dollar houses in the San Francisco Bay Area, undaunted by the higher mortgage rates and rising home prices that have prevented many would-be buyers from affording a home. The Bay Area buying spree is the clearest manifestation of a nationwide trend of sales of upper-end properties largely holding up better than sales of less expensive homes.

3 per cent increase from a year earlier. 4 per cent to $377,245. 1 per cent. 7 per cent. 7 per cent compared to a 6 per cent decline in sales of middle-market homes.

Urgency to buy a home before potential AI IPOsIn the Bay Area, tech companies bent on winning the race to develop artificial intelligence into a profitable business have juiced compensation to recruit talented executives and software engineers, widening the pool of high-income earners. The Bay Area housing market could get even hotter should two of the biggest names in AI follow through on their intent to become publicly traded companies.

Why it matters

Metro areas such as San Diego, Miami, Detroit, Nashville and Tampa, Florida, are also seeing upper-market homes sell at a faster pace. The hotter market for luxury properties comes at a time when the broader housing market remains stuck in a yearslong rut. S. homes were essentially flat last year, moored at a 30-year low. Most recently, they slowed again in July.

Sales of newly built homes, which make up a far smaller part of the housing market, are also down this year. Underpinning the luxury market are affluent home shoppers who can afford to shrug off rising mortgage rates and often pay all cash for a home or come up with a large down payment by raising funds through sales of stocks or other investments.

Stock market gains powered by the artificial intelligence boom have helped boost investors' portfolios. The benchmark S&P 500 is up solidly this year and remains near its most recent all-time high. "These people have lots of money and they're just not going to be very sensitive to things like mortgage rates or home prices," said Daryl Fairweather, chief economist at Redfin.

"The trend is the housing market version of the "K-shaped" economy, where wealthier households pull ahead of middle- and lower-income ones. In this case, many would-be homebuyers remain on the sideline while affluent buyers drive sales of luxury homes.

Sales of pricier homes are holding up betterNationally, sales of luxury homes, defined as properties in the top 5 per cent of a metro area by price, rose 2 per cent in the first half of this year, compared to the same period in 2025, according to data from Redfin. 9 per cent in the same period. The dichotomy in the market can better be seen in price appreciation.

What to watch

OpenAI, creator of ChatGPT, and Anthropic, home to Claude, filed preliminary paperwork in June for initial public offerings. Just the possibility of these two blockbuster IPOs is building pressure on some home shoppers in the Bay Area to buy sooner, rather than later.

"So, you start taking a look at that and you take a look at your own position - both from just a diversification standpoint, as well as the fact that we're trying to set roots here, kids are in school, all that good stuff," said Bermudez, 41.