San Francisco Housing Market Surges with Record Overbidding and Low Inventory

San Francisco Defies Trends with Record Overbidding in November 2025

The San Francisco housing market witnessed unprecedented activity in November 2025, as 80% of single-family homes and 44% of condos sold above the asking price. This surge is fueled by a significant decrease in inventory, which has dropped over 30% year-over-year. The city's real estate market stands out in stark contrast to the cooling trends observed in many other regions across the United States, driven by renewed buyer demand and favorable mortgage rates. The booming AI startup scene in San Francisco has also played a crucial role in this market resurgence, solidifying the city's position as one of the hottest real estate markets in the country.

AI Boom Drives San Francisco's Real Estate Revival

According to Moles Group, the influx of AI companies is a primary driver of the San Francisco real estate revival. These companies now occupy approximately 5 million square feet of office space, a figure expected to increase dramatically over the next five years. This expansion has led to a surge in housing demand, particularly in neighborhoods close to AI hubs, where rents for two-bedroom units have increased by over 16% year-over-year. The impact of AI is not only confined to the rental market but is also significantly boosting home sales, which rose by 5% in 2025.

San Francisco's Inventory Hits a Decade Low

The current housing inventory in San Francisco is alarmingly low, with only a 1.3-month supply of single-family homes on the market, as reported by Moles Group. This short supply, coupled with high demand, has led to fierce competition among buyers, contributing to the high rate of overbidding. The situation is further compounded by the city's median rent, which reached $3,040 in August 2025 — the highest increase among major U.S. cities, according to Rebecca Realtor.

Contribution of Mortgage Rates to Market Dynamics

Mildly decreasing mortgage rates have also played a role in the housing surge. As noted in Colleen Cotter's predictions for 2025, there is an expectation for mortgage rates to stabilize, with potential decreases in the latter half of the year. These favorable financing conditions have encouraged more buyers to enter the market, exacerbating the already limited inventory and driving prices upward.

Regional Comparison: Bay Area vs. San Francisco

While San Francisco's real estate market is thriving, the broader Bay Area has not experienced similar growth. Data from Rebecca Realtor indicates that sales in the Bay Area have declined by about 2% year-over-year, highlighting San Francisco's unique market conditions. This divergence underscores the importance of the tech industry's presence in San Francisco, which has attracted both domestic and international buyers.

Expert Insights: RealEstateAbroad.com Analysis

Maya Tarek, Senior Analyst at RealEstateAbroad.com, emphasizes the strategic opportunities present in San Francisco's current market. "Investors should focus on properties near tech hubs and established neighborhoods, where demand is most robust," she advises. "Given the low inventory and competitive climate, securing properties in well-connected areas could yield significant returns." Tarek also suggests monitoring mortgage rate trends, as any fluctuations could influence buyer behavior and market dynamics.

Future Implications for San Francisco's Real Estate Market

Looking ahead, the San Francisco housing market is poised to maintain its momentum, driven by continuous demand from the AI sector and potentially stable mortgage rates. As more AI companies establish their presence, the demand for housing near these innovation hubs is expected to rise. Nonetheless, challenges such as inventory shortages and affordability issues remain key concerns that could impact long-term sustainability. Investors are encouraged to keep a close watch on these market dynamics and consider strategic investments that leverage the city's robust tech-driven economy.

• Focus on high-demand neighborhoods for investment.
• Monitor AI sector growth as a predictor of housing demand.
• Consider the impact of potential mortgage rate changes.