Bay Area Luxury Home Sale Volume Nears Market Top

The Bay Area’s luxury home sale volume hit its second-highest level in nearly 20 years, according to 2024 Compass data, spurred on by a rising stock market, the AI boom and a growing immunity to higher interest rates among wealthy buyers.

The number of Bay Area closed home sales over $5 million topped 1,000 for only the second time since Compass began tracking that data in 2005. That’s a rebound of about one third compared with 2023 and a more significant recovery than the overall market, which saw a 9 percent year-over-year increase in 2024. The luxury market topped out in 2021, with more than 1,200 Bay Area homes selling at prices exceeding $5 million.

The Peninsula and Silicon Valley both hit new pricing highs, at medians just shy of $2 million. At a median of $1.7 million, Marin was still 5.6 percent below its peak in 2022, and at $1.63 million San Francisco was nearly 10 percent off its 2021 peak. San Francisco also had by far the lowest price appreciation over the last five years, at just 5 percent above 2019 medians. As one of the centers of the AI boom and with South Bay tech companies calling their employees back to the office last year, Santa Clara prices went up over 50 percent in the same period.

In previous downturns, the Peninsula took longer to bounce back than San Francisco, said Sotheby’s International Realty agent Janet Feinberg Schindler, who specializes in San Francisco’s luxury-heavy northside and publishes an annual report on market trends in those neighborhoods, which include Pacific and Presidio Heights, Cow Hollow and the Marina.

Her data indicates that $3 million-plus home sales volume in those neighborhoods ticked up an average of 42 percent between 2023 and 2024, although it was still down by 31 percent from the 2021 peak. Condominium unit sales volume over $1.5 million was also up 42 percent, but still down 38 percent from three years earlier.

After the initial uptick in 2021, many buyers became “disillusioned with San Francisco” given its emptied out downtown, closed restaurants and retailers, issues with street conditions and safety concerns in the aftermath of lengthy COVID shutdowns, Feinberg Schindler said. These factors have all been less widespread on the Peninsula, she added.

But younger people — many of whom are part of the AI boom — appeared not to be as bothered by these issues, she said.

“With many working remotely and relying on online shopping rather than brick-and-mortar stores, the state of the streets may matter less to them than to families with young children,” she said.

Young families, with and without children, have more recently been committing to making San Francisco their home, she said, especially after the November election.

“There’s a renewed sense of hope and optimism with the election of a new mayor who is seen as independent from the political machine many believe has hurt the city with corruption and policies like catch-and-release,” she said. “This new leadership brings the possibility of real change and a cleaner city.”

Compass agent Nina Hatvany agreed that the dismal outlook she attributed to “doom loop” narratives in the media over the last few years appear to be changing, with Daniel Lurie as mayor and more moderate supervisors giving buyers hope that the city is on an upswing, she said.

“It’s early days yet, but the weather is good and things seem to be moving, despite the stock market gyrations and the relatively high interest rates,” she said.

Luxury buyers are more likely all-cash buyers so they are less impacted by rate fluctuations. Feinberg Schindler said it appears that even buyers who do get financing are starting to adjust to current interest rates given that they are still well below historic highs.

“When you consider that people were still buying homes with rates as high as 18 percent, today’s rates don’t seem so bad,” she said.

What will really make a difference in San Francisco’s spring market is more inventory, the agents said, and if it remains limited that should push prices up. While the spring season traditionally kicks off post-Super Bowl, the luxury homes that have come to market this year already have fared well.

Bay Area Luxury Home Sale Volume Nears Market Top — 3627 Divisadero Street (Compass)

Hatvany said a home at 2258 Beach Street in the Marina was just listed at under $6 million and is rumored to be in contract at close to $7 million after getting seven offers. Three of the buyers who didn’t get the Beach Street house came out to Hatvany’s new $7 million listing at 3627 Divisadero a few blocks away, which she said had four showings within a day of launching on the MLS this week.

The demand for quality, updated housing remains very strong on the Peninsula as well, said Menlo Park-based Compass agent Katharine Carroll, following pent-up demand and low inventory in 2023 and 2024. Developers are actively looking for projects at every price point in the luxury market, she said.