Tag Archives: supply-and-demand

SF BAY REAL ESTATE MARKET IS WILD – ARTIFICIAL INTELLIGENCE, MASS LAYOFFS, LACK OF SUPPLY, OHHHH MYYYY….

Posted on by
Reply

AI, cryptocurrency, and space exploration will change the world. AI this, AI that. I have lived in the SF Bay Area for exactly 30 years moving here for a job after my MBA. I have lived and worked through multiple economic highs and lows, including tranformational changes to the world; I’ve did it, done it, and lived it.

  • I was an early pioneer during the Internet boom in the late 90’s, early 2000’s helping create new technologies, marketplaces, business models, and improving how people function in daily life. The Internet changed the world, but took longer than expected. After the dotcom bubble burst, the economy ramped up and the Internet truly shifted how the world operated.
  • In the mid-2000’s when I held Internet VP of Biz Dev roles, I worled with some of the largest subprime mortgage lenders. With 2 degrees in finance and former financial services strategy background, I anticipated the bubble when anyone with a pulse qualified for these subprime (“liar”) loans and no down payment to purchase real estate. The mortgage meltdown was a horrible time period as millions lost their homes to foreclosures tanking the US housing and financial markets that took many years to recover.
  • More recently, the Covid “black swan” impacted real estate in the SF Bay that would have been hard to forsee. We saw a drop in the 1st year of shelter-in-place, but then real estate demand spiked for single family residences outside major metropolitan cities like SF. People worked remotely and wanted more space during the lockdown. They moved to the suburbs and to vacation towns near mountains and oceans/lakes. High density cities with financial districts were deserted for a few years affecting both commercial and residential real estate markets in those cities like San Francisco. 

SF BAY REAL ESTATE IS A CONTRADICTION

The current SF Bay real estate market is in a really confusing dynamic now. On the negative side “Big Tech” companies have laid off thousands of employees as AI has allowed companies to eliminate some skilled engineers, data scientists, product managers, various business functions, and other operations across junior to mid-level roles . Some well known tech firms announced cuts in 2026 such as:

  • Meta 10%
  • Linkedin 500 locally
  • Cisco 4000 globally, 500 locally
  • Intuit 17% / 3k
  • Oracle 30k (yes, that’s thousands) globally, up to 1k locally

Over the past 6-12 months there are a variety of factors pulling at real estate supply and demand:

  1. Engineers and other skilled technical and businesspeople who have worked in Big Tech for a number of years have savings from “in-the-money” stock options and RSU. As of July 10, 2026 YTD Nasdaq is up 13% and up 70% from 5 years ago.
  2. There are very motivated, highly qualified buyers out there who are actively looking particularly in the $1.5-3.5m range.
  3. Given the shaky Silicon Valley job market, high inflation and general economic uncertainty, many potential buyers have postponed purchasing or decided to only casually look.
  4. With fewer active “move-up” buyers, this has affected the supply of available properties at the entry-level causing a supply constrained market.
  5. The SF condo segment was one of the weakest markets since the pandemic in the entire Bay Area due to exodus of workers from the city and remote work. Demand improved in 2025, and then spring 2026 saw a material increase in demand, and thus prices, for condos in SF partially due to the recently announced liquidity event with SF Bay based AI companies. Examples are:
  • Anthropic: The AI developer filed S-1 with anticipated valuation approaching $1 trillion, plus its many major acquisitions of other companies. 
  • OpenAI: The ChatGPT maker filed for IPO with a current valuation of over $850 billion. That’s “B” as in Billions
  • Databricks: Data and AI analytics platform is close to filing.
  • SpaceX: IPO with current valuation of $1.5T, that’s “T” as in Trillions!

QUESTIONS AND TAKEAWAYS FOR REMAINDER OF 2026

  1. Supply is low in SF, Peninsula and South Bay right now. Will supply increase in September/October 2026?
  2. San Francisco real estate is surging with low supply and heightened demand such that many properties including SFR, condos and even some duplexes are setting offer dates. Tjhis includes SF condos that are vacant, move-in condition, in desirable neighborhoods are going multiple offers after being very slow movers for past 5+ years.
  3. Segment of buyers who are waiting and seeing how the economy evolves and whether their companies will lay off more people as many people are feeling uncertainty with their job security.
  4. Move up buyers are slow to upgrade given shaky economy, and that their current property has a <3% interest rates compounding the opportunity cost of purchasing a larger/better home.
  5. Current uncertainty of the US and International political climate adds to nervousness of the current economy.
  6. Lastly, for my SF Bay Area readers, what will the Golden State Warriors do with the team without Lebron joining the team? Will they now trade Steph Curry and Draymond Green for young players and a haul of 1st round picks to rebuild?

As always, feel free to reach out to Peter.Tao@cbnorcal.com if you ever wanted to talk SF Peninsula real estate.

2023 OBSERVATIONS OF SF PENINSULA REAL ESTATE STORYLINES

Posted on by
Reply

Please “like” my Peter Tao Real Estate Facebook Page to get notification of my upcoming thoughts on the 2024 SF Bay 2024 real estate trends.

There was quite a bit of uncertainty at the start of 2023 about where real estate markets would go. One word, Supply and Demand….wait, that is three words. My most popular article Microeconomics for Real Estate I wrote in 2013, exactly 10 years ago, continues to get dozens of viewers every day due to being highly ranked in the Google SEO algorithm. To overly simplify, there is low supply amidst moderate demand for the following reasons:

DEMAND

While there are a good number of (potential) buyers out there, some percentage of them are unsure what to do given economic factors, such as interest rate, stock market and their own employment. There are highly qualified buyers interested, some are motivated while some are taking a cautious approach. There is moderate demand, although lower than post pandemic and prior to the current interest rate/inflationary spike.

SUPPLY

The move-up and down-size Buyers have significantly decreased due to the higher interest rate situation. Most owners have rates locked in at 2.5-4% with a lower property tax basis (in California). To purchase a larger home would mean to get a mortgage at 6.5-8% with a higher property tax basis; it would be a large financial step-up than in recent times. This dynamic puts a constraint on the supply side of the local real estate market.

PRICING MOVEMENTS

In a typical supply and demand curve, usually a low supply and moderate demand situation would create some price increases. In a “hot” “sellers market” which we’ve seen in many of the years over the last 8+ years, prices are increasing across all segments of the real estate market in the SF Peninsula market – condo, single family, multifamily, various cities, neighborhoods, starter, luxury. In 2023, we saw a real segmentation of pricing and demand – a flight to “quality”. By “quality”, single family residences that had some positive combination of nice move-in condition, good location, zones to popular schools, usable nice lots/backyard were the ones that saw multiple offers with some price increases from 2022.

Unlike past years in a really “hot” market, even with lower supply of listings, there were many properties that did not sell right away, sat on the market and/or went through price cuts. Because there were a lot of careful buyers out there, many buyers were more conservative in how they approached purchasing and preferred to wait for more attractive properties rather than making offers on a property that may have some major negative characteristic.

STRONG DEMAND EXAMPLE

The “Hallmark” neighborhood within Belmont Woods in Belmont up saw every (only 6 total) SFR sold in 2023 at $3.0 million and higher. See summary chart:

ADDRESSBDBASQ. FT.LOT SIZESOLD PRICECOMMENTS
23 Somerset Ct.43.53,02021,9003,300,000Big views, at trails
2884 Wakefield Dr.42.52,22017,3523,100,000Terraced sloped lot
2558 Somerset Dr.43.02,6727,0403,200,000Move in
2609 Somerset Dr.42.52,76011,9153,420,000Needs work, big flat lot
2741 Waltham Cross43.53,42710,2413,608,888Renovated, with pool
2759 Waltham Cross42.51,82012,2353,000,000Original, big flat lot
2023 Closed Transactions for SFR within “Hallmark” submarket of Belmont Woods, Belmont, CA

Hallmark has always been popular, but why has this pocket of homes in particular withstood macroeconomic conditions more so than most neighborhoods?

  • Typically above average size lots, some with views
  • Near waterdog park and cross country trails, wide streets with sidewalks
  • Neighborhood built from late 1960s to 1970s so floor plans of houses tend to be very appealing with vaulted ceilings so spacious interior feel w/curb appeal
  • Highly-regarded Belmont-Redwood Shores school district
  • 4 of the houses sold for multiple offers; 2 of the houses actually did not sell right away and went through price cuts due to being aggressively overpriced when first listed. Pricing appropriately is still extremely important in any market. 

SOFT DEMAND EXAMPLE

There have been numerous articles regarding the city of San Francisco and the challenges since the pandemic. While the SF condominium segment was particularly affected in 2021-2022, we did see SF condos as a whole stabilize in 2023 given the low inventory environment. A neighborhood still recovering though is West part of South of Market (“SoMa“). A few fundamental reasons:

  • Residences often work in financial district or start-up high tech area of South Beach and employees generally no working in offices yet
  • Mid-market corridor of SoMa which has been a economic redevelopment area lost many major high technology company tenants that employed many professionals
  • Pre-pandemic, SoMa saw a huge new construction boom of mid-rise condo projects saturating the western part of Sout of Market near mid-market area with inventory/supply

We know the markets go up and down and areas see growth and weakness. A key question is timing. Could this neighborhood be a buying opportunity in the near future from an investment stanpoint or is it still too early? There are just so many variables and nuances to consider which is what makes real estate so intersting to me and why understanding the MICRO-markets and balancing it with understaning of the macro financial marketsso important

MY 2023 REAL ESTATE SUMMARY

Sales volume is down YTD 2023 vs. 2022; preliminary estimates I am hearing has volume decreasing up to 20% year-over-year decrease of total volume in various part of SF Peninsula. I am so thankful for my clients and friends who trusted me this year, and who also referred me to their friends and family to navigate an uncertain, nervous marketplace due to higher mortgage rates that really changes the dynamics of the market. I will once again be top 8 in my Coldwell Banker office of 150 licensed Realtors.

As always, the opinions written in my articles are my personal opinions. Please feel free to contact Peter at peter.tao@cbnorcal.com anytime to brainstorm anything real estate, Warriors, Niners, local dog parks, schools, and/or restaurants. 😀 My next article will be about my forecast for 2024 SF Bay Area real estate markets. Thus, to be stay up to date on my thoughts, upcoming listings and interesting real estate news, please “like” my Peter Tao Real Estate Facebook Page. Happy holidays!