Housing Wars Continue as Cash Buyers Surge

San Francisco’s bidding wars have carried straight into February, fueled by an extreme lack of inventory and very strong buyer demand. Brokerage sales meetings are once again filled with stories of multiple offers and highly competitive price outcomes.

Agents have been preparing their buyers accordingly. Those needing financing are being urged to move beyond simple pre-approval letters and complete full underwriting with trusted lenders, positioning them to compete more effectively with all-cash buyers, who are appearing with increasing frequency in competitive situations.

The data reinforces what we’re seeing on the ground:

27% of all single-family homes sold in San Francisco since January 1 were all-cash, up slightly from this time last year (26%).

The big change: for homes sold over $3M, that figure rises to 53%.

At this time last year, just 29% of $3M+ sales were all cash.

The continued influx of AI-driven capital, combined with renewed global attention on San Francisco and sustained renter demand, has created a powerful demand backdrop. With supply still constrained, competition remains intense, particularly for well-located, thoughtfully prepared homes.

As always, markets evolve. But for now, the imbalance between supply and demand is clear, and sellers who enter the market strategically are finding meaningful leverage.

Nationally, the trend has begun to shift. After several years defined by one of the most challenging affordability environments in modern housing history, conditions improved in the second half of 2025. Home prices have largely stalled, rates have eased from their peak, and affordability has modestly recovered. According to Zillow, the typical mortgage payment now consumes 32.5% of median household income - the most favorable reading since August 2022.

That marks a meaningful change from the sharp reset we experienced when mortgage rates jumped from roughly 3% in 2021 to above 7% in 2023, pushing the typical monthly payment more than $1,000 higher than pre-pandemic levels. That surge sidelined many would-be movers and slowed the market’s pace. Today, while affordability is not yet back to historic norms, the direction of travel is notably more constructive.

After dipping below the 100 benchmark in late spring, the Housing Affordability Index rebounded strongly in the second half of 2025, finishing the year at 111.6 - its highest level of the year and a clear signal of improving buying power. As interest rates eased, borrowing costs followed: the median monthly principal and interest payment declined 5.02% year over year to $2,023 (down from $2,130), and the average 30-year mortgage rate was 6.15% in early December, continuing to trend lower. Nationally, this puts more money back in consumers’ pockets; in high-cost markets like San Francisco, even modest rate relief can materially expand purchasing power - a meaningful shift in a supply-constrained environment. (National Association of Realtors)

 

 

The Budget Burden Is Lightening on the National Level

The share of income required to purchase a median-priced home has declined meaningfully from its 2023 peak and is now trending back toward the traditional 30% affordability threshold. While still above historic norms, the improvement reflects stabilizing prices, easing mortgage rates, and rising incomes. Nationally, the pressure on household budgets is moderating - and in high-cost markets like San Francisco, even incremental relief can meaningfully shift qualification power and buyer confidence. (Zillow)

Where Homeownership May Return to Affordable Levels

Zillow projects that by the end of 2026, homeownership in 20 major U.S. markets could fall at or below the traditional 30% affordability threshold - the benchmark typically considered financially sustainable. Many of these markets are in the Midwest and South, where home prices remain more closely aligned with local incomes. While high-cost coastal cities like San Francisco are unlikely to appear on this list anytime soon, the broader trend is encouraging: easing rates and moderating price growth are gradually restoring balance between incomes and housing costs nationwide.

Mortgage Rates Reach Their Lowest Level Since 2022

The rate environment continues to move in buyers’ favor. The average 30-year fixed mortgage fell to 6.01% as of February 19, 2026 - down from 6.09% the week prior and meaningfully below the 6.85% level this time last year. The 15-year fixed rate declined to 5.35%, compared with 6.04% a year ago. Lower borrowing costs are improving qualification power for today’s buyers while also strengthening the balance sheets of existing homeowners. Refinance activity has more than doubled over the past year, allowing many recent purchasers to reduce their annual mortgage payments by thousands of dollars. Stabilizing rates, improving affordability metrics, and constrained supply continue to create a constructive backdrop for housing as we move further into 2026. (Freddie Mac, Mortgage News Daily, MortgageRate.net)

 

When Rates Drop, Buyer Activity Picks Up

The relationship is clear: as mortgage rates ease, buyer activity responds. After peaking in 2023, rates have trended lower and the Mortgage Purchase Index has begun climbing alongside them. While activity remains below the ultra-low-rate surge of 2020-2021, momentum is building again. Even modest rate relief can meaningfully expand qualification power, particularly in high-cost markets like San Francisco where small rate shifts translate into substantial purchasing capacity.

The Mortgage Purchase Index has been steadily improving over the past year, signaling renewed buyer engagement nationwide. After bottoming out in late 2023, demand has moved higher month over month, reflecting greater confidence as rates stabilize. In supply-constrained markets like San Francisco, even incremental increases in demand can quickly translate into competitive conditions - a dynamic we are already beginning to see on the ground. (Freddie Mac, MBA)

San Francisco Prices Surge

San Francisco entered 2026 with decisive price momentum. Median sale prices for single-family homes surged 16.23% year over year, reaching $1,653,325 - a powerful signal of renewed demand at the upper end of the market. Condominiums also posted gains, with median prices rising 2.77% to $1,020,000. The divergence between property types remains notable: single-family homes are trading at nearly 15% above original list price on average, reflecting intense competition, while condos are closing at approximately 97.7% of list price, offering more measured opportunities for buyers.

 

San Francisco Inventory Remains Low

The inventory shortage that defined the end of 2025 has carried over into the new year. There are currently just 148 single-family homes for sale in San Francisco, representing a 37.82% decline compared to January 2025. The condo market is facing similar constraints, with inventory down 36.94% year-over-year to just 338 units. Combined, there are fewer than 500 homes available for sale in the entire city. While new listings did pick up from December's lows, the market remains starved for inventory, and buyers continue to face an extremely limited selection of properties.