Compass economist forecasts AI housing boom

Compass chief economist Mike Simonsen is watching the housing market closely, with a particular focus on how tech wealth is impacting local housing in San Francisco. The tech sector’s growth is having a “really dramatic” impact on local housing, Simonsen said, though he remains uncertain if the trend will spread beyond the city.

A shift in buyer demand

While obstacles like tariffs, inflation, and global conflicts have slowed activity in recent years, Simonsen argues that the second quarter of 2026 was actually the strongest for buyer demand in the past four years. Mortgage rates have hit a peak for the year, yet they remain within a range seen over the last three years. This combination has created a “tug of war” between rising rates, which may curb some demand, and the “wealth effect” driven by record-high stock markets and peak business profitability.

Simonsen notes that this wealth effect is currently fueling demand among the upper classes. The market is currently waiting to see which of these two factors will win out. Even slightly lower rates have contributed to some positive momentum in pending sales, though it is unclear how long that may continue. If rates do not fall from the upper 6% range, Simonsen predicts inventory will grow incrementally, which will put pressure on home prices by next summer. Conversely, if rates decline even slightly within the next few years, he believes the market would get back on track to a more normal, healthy level for home sales by around 2029.

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San Francisco stands apart

Real estate agents have been anxiously looking for positive signs to get consumers off the sidelines. According to Simonsen, the data is finally showing movement. He pointed out that the surge in San Francisco is worth watching, especially if it starts to spread to other areas.

Simonsen has tracked 144 residential sales in San Francisco that have sold for at least $1 million above asking so far this year. This is a significant jump from the nine homes that did so last year.

Local residents face restricted choices due to limited inventory.