Many Californians are concerned about AI ending their careers.
For the super-rich, AI could block their dream of buying a multimillion-dollar home.
San Francisco is enjoying a huge demand for luxury homes, thanks to newly minted millionaires with big bonuses and large paychecks.
Blame Anthropic, OpenAI and other AI-affiliated companies.
Bay Area boom
San Francisco’s luxury home sales – the top 5% of transactions – increased 22% in March, compared to a year ago, according to Redfin. It was the fifth consecutive month of double-digit gains for high-end home sales in San Francisco.
Like then, the demand for luxury homes is high and supply remains low, falling 15% from a year ago.
Almost two of every three high-end homes listed in San Francisco in March entered escrow within two weeks, compared to 45% a year ago. The average home entered escrow in 12 days, down from 28 a year ago.
That’s housing boom fast.
But the red-hot market could ease in the coming months, especially since new listings have increased 15% from a year ago, as more luxury homeowners are looking to benefit from the demand for their multimillion-dollar homes.
Luxury comes at a $7 million price
The competition – some homes are getting dozens of offers — coupled with the still-limited supply has lifted luxury home prices to a record $6.81 million, a 9% increase compared to a year ago.
It’s an about-face from just a few years ago, when many San Francisco residents were leaving the city in search of cheaper housing and more space. And prices were slumping.
Want a Painted Lady? It’s gonna cost. A lot. ADOBE STOCK
“There was this hysteria a few years ago that people were leaving San Francisco in droves and the housing market was going to crash,” said Ali Mafi, a Redfin premier agent in San Francisco. “That wasn’t true then and it’s the opposite of true now. While some people left during the pandemic, many of those people are now coming back after realizing they don’t actually want to live in whatever state they moved to. Plus, there’s a whole newpool of AI employees. They’re bringing so much money into the housing market, especially the luxury market.”
Silicon Valley slump
The boom has not trickled down much to the non-luxury market, basically homes for everyday folks who can afford a $1.5 million in San Francisco. Non-luxury homes prices and sales have barely budged compared to a year ago.
In nearby San Jose, the boom of 50 miles away is more like a bust. San Jose’s high-end median-home price was $5.6 million, a scant 0.3% increase from a year ago. And sales are down 11% from a year ago.
The other six regional markets enjoyed better price gains but also suffered similar sales drops.
Los Angeles and Anaheim had the second- and third-best price gains in the state at 7%. But they also had the two largest drops in sales at 25% and 17%, respectively.
So, bragging rights belong to San Francisco, at least for this round. Just ask Claude.
| City | Median sales price of a luxury home Q1 ’26 | % price change from a year ago | % change in sales from a year ago |
|---|---|---|---|
| Anaheim | $5.48 million | +7.0% | -17.4% |
| Los Angeles | $4.5 million | +7.3% | -24.5% |
| Oakland | $3.08 million | +2.2% | +2.1% |
| Riverside | $1.73 million | +2.9% | -12.2% |
| Sacramento | $1.74 million | +4.6% | -3.9% |
| San Diego | $3.77 million | +4.7% | -3.1% |
| San Francisco | $6.81 million | +9.0% | +22.2% |
| San Jose | $5.6 million | +0.3% | -11.2% |
Source: Redfin
Fewer homeowners are equity rich, more are underwater
Fewer homeowners are considered equity rich in California, and more are getting behind on their mortgage payments, the latest evidence of a hard-hit housing market.
Now, more than half (53%) of the state’s homeowners in the first quarter were considered “equity rich” – debt is less than half of the current market value of their home – but that is down from 57% in first-quarter 2025, according to ATTOM Data.
And the percentage of homeowners who are seriously underwater on their mortgage – in the red by at least 25% — inched higher to 1.7% in the first three months of the year compared to 1.3% a year ago. However, the statewide figure is much lower than the national average of 3.2%.
‘Signs of moderation’
Higher but not much of a worry. Many homeowners with underwater mortgages are recent buyers, likely in the past two or three years. Majority of homeowners have a ton of equity and could sell their home and net a nifty payday of hundreds of thousands of dollars.
But it’s worth watching, housing experts say.
“Homeowner equity remains relatively strong overall, but we’re seeing signs of moderation,” said ATTOM CEO Rob Barber. “As mortgage rates have risen and home prices have cooled, the share of equity-rich homes has declined in most markets while the rate of seriously underwater properties is edging up across much of the country.”
State still has some of the highest percentage of equity-rich owners
California has some of the cities with the largest percentage of equity-rich owners, including a nation-leading 65% in San Jose, followed by Los Angeles (59%) and San Diego (58%).
However, the aptly named Golden State does not rank among the top five states with the largest percentage of owners. Vermont easily led the way at 86%.
But even in San Jose, where AI has boosted incomes and home prices (see previous post), the percentage of equity-rich homeowners has fallen from 68% a year ago.
The other seven regions in the report, from the Bay Area and the Sacramento region to San Diego, had 3%-5% drops in equity rich homeowners from a year ago (see table, below).
The Central Valley, from Bakersfield to Sacramento, had the smallest percentage of equity-rich owners in the state. The three cities, among the most affordable in the state, were close to the national average of 43%, according to ATTOM Data.
| City | % of equity rich homeowners Q1 ’26 | % of severely underwater mortgages Q1 ’26 |
|---|---|---|
| California | 52.9% | 1.7% |
| Bakersfield | 40.4% | 2.0% |
| Fresno | 45.8% | 2.0% |
| Los Angeles | 59.3% | 1.4% |
| Riverside | 52.0% | 2.4% |
| Sacramento | 42.3% | 2.0% |
| San Diego | 58.2% | 1.2% |
| San Francisco | 54.3% | 1.9% |
| San Jose | 65.2% | 0.8% |
Source: ATTOM Data
KB Home has about 100 new-home communities under construction or selling in California. ADOBE STOCK
KB Home will move headquarters from LA to the Phoenix area
A company that has built tens of thousands of homes, many for first-time homebuyers, will relocate from California to Arizona.
KB Home, which helped bring first-time buyers to the San Fernando Valley in the 1960s and 70s, will move its headquarters to Tempe, a suburb of Phoenix.
The company, founded by Donald Bruce Kaufman and Eli Broad, started in the Detroit area in the 1950s, before moving to Los Angeles in 1963. More than 60 years later, the housing market that built the company has changed.
“This move brings our teams together in a more collaborative environment, and Phoenix is the right place to do it,” said Robert McGibney, president and CEO of KB Home. “It positions KB Home to operate more effectively and supports the next phase of our growth.”
More competition, tougher housing market
KB Home will continue to build homes in California, with about 100 neighborhoods under way. But Arizona, especially in the Phoenix areas of Chandler, Gilbert and the West Valley, has become a hotbed for home construction.
The company also cited a better business environment compared to California, where KB Home will continue with six operating divisions. But KB Home is also competing with other national builders, such as D.R. Horton, Lennar, Taylor Morrison, Woodside Homes and numerous startups in recent years, such as the New Home Company, now known as Risewell Homes.
KB Home joins many other companies that have left California, including Public Storage and Realtor.com. The companies often cite the business climate and costs.
