Toby Howell

If you've ever wanted to live in San Francisco, you probably have a better chance of tackling Christian McCaffrey in the open field than affording a nice home there.

Luxury home prices in the Bay Area, defined as those that cost between $3 and $7 million, have jumped 13.4% since the launch of ChatGBT in 2022.

However, if your trashcan isn't hidden behind ornate cabinetry, you probably wouldn't know it.

Lower end Bay Area home prices actually fell 3.8% over the same period.

The two markets used to move relatively in lockstep, but now that AI money has rolled in, it is totally throwing things out of whack.

OpenAI alone had about 600 employees who collectively cashed in

On $6.6 billion of shares last year, that's who you're bidding against, and it's why the upper half of the market is just going bonkers.

Pending luxury home sales and SF up 48% year over year.

Average luxury sales price up to $6.7 million.

Condo prices are up 24%.

So Neil, you have this very weird juxtaposition where a recovery in the housing market isn't being driven by normal things like falling mortgage rates or middle class purchasing power, but by an insane infusion of cash, thanks to AI startups, warping the top echelon of the market.

And this warping of the market blooms outwards.

It's not just in San Francisco because when luxury booms happen, the ultra, ultra-rich, we're talking very tip of the iceberg bid up homes in San Francisco, but that may push affluent buyers into slightly cheaper neighborhoods, but also it pushes them into neighborhoods

different metro areas altogether, which is why you might see spikes in places like Austin, Denver, Nashville, Tampa, these other places that are less expensive.

But again, when you're not in the 1.1110% of AI money users, these price effects ripple outwards nationally.

And then the other thing that's happening, I mentioned that mortgage rates are still elevated.

And usually when mortgage rates falls, that revives a housing market.

Most of these buyers are all cash buyers.

They don't need mortgages.

When you are competing for these homes and you run into situations where people are paying an entire year's worth of rent, cash is king, which is why, again, you are seeing kind of it go against the grain.