In the 1990s, commercial real estate brokers told me about clients purchasing properties in other states sight unseen, except through photographs and maybe early websites. The memory of the modem’s dial-up tones (which we endured just to get that blistering 28.8 kbps connection speed) might be an amusing throwback to those ancient times, but even then, buyers, sellers, and agents were using technology at its cutting edge to conduct real estate business. That continues today, though the cutting edge is artificial intelligence, and it’s changing everything for everyone, including the health of San Francisco’s market.
Eric Jacobs, president of Anywhere Integrated Services, writes at First California Escrow that AI is showing up in real estate agents’ workflow in multiple ways, including using “virtual assistants” for one-off and ongoing tasks, speeding up mortgage and title insurance processes, and AI-powered listing tools.
San Francisco is more or less ground zero for the AI industry, and it is credited with helping fuel the recovery of the city’s downtown and its housing markets as companies open up offices here and hire well-remunerated employees.
“AI Cash Ignites a Boom for Multimillion-Dollar San Francisco Homes,” shouts a Bloomberg headline. “AI came to San Francisco. A ‘homebuying boom’ followed,” according to a quieter but still on-point Smart Cities Dive headline.
Paul Barbagelata is a broker associate and president of BarbCo Group in San Francisco, where he says his team has seen a strong uptick in AI-connected buyers — and not just software engineers but people involved in all facets of the new industry. “There have likely been more sales in the last six months tied to AI-related purchasers than ever before,” he told The Voice.
Kevin Kropp, a sales manager with Vanguard Properties in the city, agrees, adding that “AI is definitely pushing the market.” The impacts are not only felt by grateful sellers. He says he is seeing “large numbers of cash purchases, noncontingent offers, and quick closings. What is interesting is there is no talk about interest rates or the impact they may have on purchasing power. The new wealth found through AI is forcing more traditional buyers to up their game in order to compete in the ever-changing S.F. market.”
Kropp says the AI buyers seem very focused on single-family homes. “Since June 1 of this year, we have seen nine homes sell over $2,100 a square foot, with a high of $2,743 citywide and a high of $2,127 in Noe Valley.” He cites “an overall optimism in the city” that is having knock-on effects. AI buyers might be focused on the single-family market, but condo sellers are back in the game: “[T]he condo market is coming back as people are getting priced out of single-family homes. The rental market remains strong, which has also helped lift the investment property sales. They say that a rising tide raises all ships, and in this case, it is certainly true.”
“I don’t think you can pigeonhole the AI buyer,” says Barbagelata. “We’ve seen mid-20s buyers purchasing condos in vibrant downtown locations where proximity to work is key, but we’re also seeing the other side of the coin — middle-aged homebuyers raising kids on the west side of San Francisco.”
Tools of the trade
Jacobs writes that real estate industry professionals should educate themselves on AI myths and reality: “Change is happening at an extraordinary speed, and while it is always nice to be an early adopter, risks must be considered. AI applications have been criticized for their exposure to meaningful bias based on the data that is provided. As real estate professionals, we must make sure that we are using the right tools and monitoring them closely to avoid such problems in our business.”
I’d add that — in addition to real estate agents — home buyers, sellers, and renters should learn more about hype-versus-reality.
San Francisco is ground zero for the AI industry, and it is credited with helping fuel the recovery of the city’s downtown and its housing markets.
AI is, of course, an increasingly prominent element of fraud in all aspects of real estate deals. “We are seeing a lot of scams in the rental markets,” Kropp tells The Voice. “There are multiple ads for rentals who are asking for money up front from potential applicants. Tenants are fighting to get good housing and are losing money in an attempt to get a leg up on a great rental.” He says he recently received a call from someone asking about a condominium Kropp had just sold. “It was a scam and I told the person not to send any money. One dangerous thing is that we are seeing buyers use AI to analyze disclosures. Although this may be helpful on a cursory level, the nuances of the S.F. market and types of construction we have require a deeper understanding. This is where a qualified team of Realtor, inspectors and professionals can advise you.”
Even as the bots advance, it increases the need for the human element.
Headline of the week
“L.A. Mayor Karen Bass Says You Can Defeat NIMBYism by Building Less”
— By Christian Britschgi (Reason)
Go figure
80 percent: increase since 2020 in the monthly payments for a starter home in California; starter homes are defined as those in the bottom third of home values (Chico News & Review) … 500: number of recreational vehicles used as shelter in San Francisco, according to a city report in September (CBS News) … $300,000: per-unit price of 64 proposed homes in South Nashville, Tenn.; after local NIMBY pushback, the developer said he’d instead develop 25–30 homes with estimated per-unit cost of $600,000 (Nashville Banner) … 96,000: number of land parcels (mostly along transit corridors) in San Francisco subject to the Family Zoning Plan (KQED) … 8.2 percent: decrease in the number of San Francisco residential real estate listings from last month, “a bigger decrease than normal for this time of the year in San Francisco” (Realtor) … $4,880: median rent for a two-bedroom apartment in San Francisco (San Francisco Business Times) … Increased complaints: after a change in control of the Parkmerced housing development, Supervisor Myrna Melgar was hopeful that problems plaguing the residents would decrease; instead her office has received an increase in the number of complaints from residents about conditions at Parkmerced. “What a f—ing bummer,” said the supervisor (The San Francisco Standard).
Say what?
“None of the [developers] are bullish on this [like it’s] a golden ticket to Willy Wonka’s chocolate factory. … They all kind of understand that there’s major challenges. And unless it’s a city of Dallas site, we aren’t really advising any material change to land pricing unless we’ve heard that a particular city is clearly welcoming the policy change.”
— William Rosatti, senior advisor, Northmarq’s National Development Services, referring to a new Texas law intended to spur housing construction due to the state’s estimated 300,000 home shortage (The Dallas Morning News)