New wave of buyers heads to Peninsula — some paying $10M just for ‘dirt’

The Bay Area’s artificial intelligence boom is changing more than the fortunes of its tech workers. It is also changing where some of them want to live.

That shift is being felt across the Midpeninsula, where Realtors say they are seeing more buyers move south from San Francisco this year, drawn by the area’s larger homes, schools and relatively easy commute.

“At one of my open houses in August, every single person who visited was from San Francisco,” said Chris Iverson, Realtor for Golden Gate Sotheby’s International Realty in Menlo Park. “They realize it’s a reasonable commute, while they can take advantage of the great schools here.” 

Communities such as Woodside, Portola Valley, Palo Alto and Atherton are convenient to Interstate 280 and public transit options such as Caltrain and are drawing lots of interest, Iverson said.

But buyers are coming to the Midpeninsula from more than one direction. Workers who left the region during the pandemic in the early 2020s are returning as more employers bring people back to the office through stricter hybrid schedules and tighter attendance tracking.

“People are returning to their offices,” Iverson said. “They have to move back from (places like) Seattle and re-enter this market.”

For buyers coming from either direction, the challenge is the same: They are entering a Midpeninsula housing market that has become considerably more expensive.

AI wealth changes the buyer pool

Brian Chancellor, Vice President of Experience for Christie’s International Real Estate — Sereno Group, said year-over-year prices have soared by as much as 50% on some luxury properties. Lower-priced homes have seen price increases of 12% to 15% over 2025 levels, he said.

Demand is at least partially fueled by recent and imminent initial public offerings by AI companies in San Francisco and Silicon Valley.

The IPO activity underscores the scale of the wealth being created in the AI industry. San Francisco-based  OpenAI is preparing for a potential public offering that could value the company at $1 trillion, while Anthropic is reportedly considering an IPO that could raise as much as $100 billion at a valuation of about $2 trillion. 

“We’re at an all-time high for single-family homes,” Chancellor said of local prices.

According to CBRE’s annual Scoring Tech Talent report released on Aug. 18, the Bay Area added more than 20,000 AI jobs over the past year and had nearly 99,000 AI-skilled workers as of June. AI-related positions now account for 57% of Bay Area tech job postings, up from 20% in 2022.  

In Atherton, properties typically draw four to 12 offers and can sell for “millions over the asking price,” Chancellor said.

Tori Atwell, broker associate at The Agency Real Estate in Los Altos, said buyers from the tech industry, particularly AI, have been busy in the luxury market buying homes between $12 million and $34 million in cities such as Atherton and Los Altos Hills. 

Even homes priced at $30 million are selling briskly, Iverson said. One recent Portola Valley property sold for $56 million.

Alexander Lewicki, senior buyer specialist at Palo Alto-based DeLeon Realty Inc., said he is seeing buyers opt to spend $10 million to $11 million “for dirt,” with plans to tear down or extensively remodel existing homes.to

That appetite for land is not new, but limited inventory is adding to the competition for properties where the land itself is a major part of the value. A 1-acre property on Fairview Avenue in Atherton, for example, sold for $10.7 million in November, up from its $7.8 million asking price. The property included a home but was marketed as a redevelopment opportunity. Earlier this year, a 2.5-acre property divided into two vacant lots near the Menlo Circus Club was listed for $25.5 million, according to the sales listing. 

The Associated Press reported on Sept. 2 that San Francisco metro luxury-home sales rose 39.3% in the first half of 2026 from a year earlier, compared with a 15.1% increase in middle-market sales. 

“There’s a lot of cash in the market,” Atwell said. 

Higher rates put pressure on buyers and sellers

But the buyers with the most money are only part of the story.  For those not benefiting from record-setting AI IPOs, this fall’s comparatively high mortgage interest rates — ranging between 6% and 7% for 15-year and 30-year fixed-rate mortgages — are discouraging some entry-level buyers and others outside the luxury market.

Those higher rates are affecting sellers, too, Atwell said.

“These are people who bought years ago when interest rates were 3.5%,” she said, adding that today’s rates, nearly double that level, make sellers think twice about selling and having to re-enter today’s market.

That helps explain the dilemma facing some of the workers now returning to the Midpeninsula. Those who took advantage of remote-work arrangements during the COVID-19 pandemic to move far from the region sometimes find they can no longer afford the type of home they once owned or rented there, Iverson said.

The average Palo Alto home sale price this summer was $4.66 million, down slightly from $4.75 million a year ago but up from $4.4 million in summer 2024, according to figures from the Multiple Listing Service compiled by Patrick Foy, partner and principal of Midtown Realty Partners in Palo Alto  

Foy said the bigger change is in the price per square foot. This summer, buyers paid an average of $2,316 per square foot, up from $1,988 a year ago and $1,978 in 2024.  

“Smaller homes are selling for much higher prices now,” Foy said, citing the popularity of midcentury modern Eichler homes, which predominate in some of Palo Alto’s older neighborhoods and typically range from 1,500 to 2,000 square feet. 

This year, those homes are priced for $3.5 million and up, he said.

For buyers priced out of the single-family market, condos and townhouses may offer an alternative. Chancellor said the local condominium and townhouse market has begun to recover from its slowdown during the COVID era. But even these properties sell for around $1,936 per square foot, with a median price of $1.4 million for a two-bedroom. 

And even buyers who can afford those prices are competing for a limited supply of homes. Lewicki said sparse inventory levels — which have a long history in a largely built-up region sitting on very expensive land — have led to stiff competition and multiple offers in all price ranges. 

Lewicki said sparse inventory has led to stiff competition and multiple offers across price ranges, including the local entry-level market of $3 million to $5 million for single-family homes. July listings illustrate the limited options at the lower end. In Atherton and Los Altos Hills, all 11 new listings were priced at $5 million or more. Palo Alto had 34 new listings, with 11 priced between $3 million and $4 million, while Menlo Park had 37 new listings, including 11 in the $3 million-to-$4 million range and another 11 priced at $5 million or more, according to data compiled by Compass. 

Homes that do more

In an increasingly expensive housing market, buyers are showing interest in homes that can serve more than one purpose. Accessory dwelling units, or ADUs, can provide space for a home office, guests, extended family or, in some cases, renters, according to Realtors interviewed for this story.

Atwell said backyard cottages are particularly attractive to buyers at larger properties.

“Let’s face it, on your typical 6,000-square-foot lot, an ADU means you won’t have much of a backyard left,” she said. “They are much better suited to large lots. It’s a great concept to provide more housing units, but they don’t work for everybody.”

Lewicki said he’s seen few homeowners in the area using ADUs as rental units for additional income.

More broadly, buyers are showing a preference for homes that are ready to move into. Elyse Barca, a Realtor in the Menlo Park office of Compass Real Estate, said well-presented homes in the $3 million to $4.5 million price range in Palo Alto and Menlo Park did not linger long on the market between June and August.

“Location, condition, appearance and good pricing are the key features,” she said. “Busy, double-income buyers are still most interested in turnkey properties. They don’t have time for fixer-uppers.”

Even as home prices rose 11% in the area this August from the same month in 2025, multiple offers were not uncommon, Barca said.

“August was very busy,” Lewicki said. “People who lost out in the spring were back in the market.”

Linda Taaffe contributed to this story

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