The San Francisco Bay Area housing market has long been volatile, but by late-2025 it resembles a K-shaped economy – an environment where high-income technology professionals are thriving while entry-level buyers face headwinds. In his November 5, 2025 update, realtor Spencer Hsu called the market “a true K-shaped market.” Data from local brokerages and independent market reports confirm that high-end single-family homes remain competitive while condos and townhomes have softened. This article examines the factors behind the split market and offers guidance for buyers and sellers.
What Is a K-Shaped Market?
A K-shaped economy occurs when different sectors or demographics experience vastly different fortunes at the same time. In the Bay Area, tech workers with stock-based compensation have benefited from a booming NASDAQ. Companies like Nvidia, Broadcom, and Meta have delivered triple-digit stock gains since 2022, giving employees the liquidity to upgrade to $3 million-plus homes. Meanwhile, layoffs and high living costs have sidelined many first-time buyers, especially in the more affordable condo and townhome segments.
High-End Single-Family Homes: Still in Demand
Luxury home prices are pushing new highs. Spencer Hsu reports that Los Altos’ median price climbed from $4.7 million in 2022 to about $5 million by late 2025. In Silicon Valley hot-spots like Atherton, Palo Alto, Portola Valley, and Woodside, there are roughly 60 transactions per month for homes priced $5–10 million, with 75% under contract within two weeks. Even ultra-luxury homes ($10–20 million) sell relatively quickly when priced fairly.
Stock-market wealth fuels demand. With tech equities up over 100% since 2022, many buyers use stock proceeds or securities-backed loans to fund purchases. Limited inventory in prime neighborhoods exacerbates competition. Market reports show that single-family prices were rising in San Francisco in mid-2025, reaching $1.298 million for the median home—a 7.58% increase—while Santa Cruz and San Mateo Counties saw declines of 1.65% and 10.46% respectively. Yet even where prices dipped, tech buyers quickly absorbed desirable listings.
Condos and Townhomes: An Opportunity for Buyers
While the luxury segment sizzles, condos and townhomes have softened considerably. According to Hsu’s November update, the Bay Area median condo price hovered around $717k, down roughly 15–18% from 2022 peaks. He notes that many owners are opting to rent units rather than sell at a loss, creating “zombie properties” that add rental supply but limit resale inventory.
Independent reports confirm the softness:
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A June 2025 market report from Kinoko Real Estate found that while San Francisco’s single-family homes posted robust gains, Silicon Valley condo prices dropped sharply, including 14.88% declines in San Mateo, 3.19% in Santa Clara, and 9.71% in Santa Cruz. The authors noted that condos were taking considerably longer to sell.
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In San Mateo County, the median house price rose about 7% year-over-year in October 2025, but condo prices fell around 4.5%, illustrating the broader Bay Area pattern where condo appreciation lags.
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A Substack newsletter covering Bay Area housing trends observed that by August 2025 the median condo price in San Francisco was roughly $1.1 million, while the median single-family home price was about $1.63 million. It noted that high rents were bringing buyers back to condos, but overall condo inventory remained higher than for single-family homes.
These figures highlight a divergence between property types: luxury single-family homes are climbing back toward record highs, whereas condos and townhomes are more negotiable and offer opportunities for non-tech buyers or investors seeking entry points.
Factors Driving the Split Market
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Stock-Market Wealth vs. Wage-Based Budgets: Many established tech employees hold significant stock grants and can purchase high-end homes even with mortgage rates around 6–7%. Entry-level buyers, by contrast, rely on wages and are more sensitive to rates and lending standards.
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Limited Luxury Inventory: Prime neighborhoods in Silicon Valley and the Peninsula rarely add new single-family housing. With new construction constrained, buyers compete for a small pool of existing homes.
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New Condo Supply and Rental Alternatives: High-rise developments in San Francisco and parts of the East Bay have added condo inventory. Some owners choose to rent rather than sell, increasing supply and keeping prices subdued.
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Mortgage Rate Dynamics: Although rates moderated slightly in late 2025, they remained in a “stable band” around 6–7%. Hsu advises buyers to focus on affordability rather than waiting for drastic rate drops, suggesting the option to refinance later.
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Economic Uncertainty and Layoffs: Layoffs in the tech and biotech sectors and uncertainties about immigration and taxation have made some first-time buyers cautious. This hesitancy affects the condo and townhome segments more than the high-end market.
Timing and Strategy for Buyers and Sellers
For Buyers
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Luxury Home Buyers: Expect stiff competition. Focus on fairly priced homes; Spencer Hsu notes that about 90% of luxury listings remain unsold after two months because they are overpriced. Buyers should look for homes that are market-priced and be prepared for multiple offers.
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Condo and Townhome Buyers: Late 2025 presents opportunities. With prices 15–18% below 2022 peaks and condo inventory higher, buyers have more leverage. Non-tech professionals can enter desirable neighborhoods at lower price points. However, be prepared for slower appreciation and plan for longer holding periods.
Financing Strategy: With rates likely to stay in a 6–7% range for the near future, choose a mortgage you can afford now and consider refinancing if rates drop. Some lenders offer no-cost or low-cost refinance programs.
For Sellers
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Single-Family Home Sellers: Tight inventory works in your favor. Evaluate whether you would purchase your home at today’s price. If not, consider listing before spring when inventory usually increases.
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Condo Owners: Decide whether to sell or rent. With prices down, holding and renting might make sense if cash flow is strong. If you need liquidity, be realistic about pricing and prepare for longer days on market.
The Road Ahead
Most analysts expect the K-shaped pattern to persist into 2026. Market data suggests that single-family homes will remain competitive, particularly in tech-driven neighborhoods, while condo prices may stay flat or experience mild declines as supply normalizes. However, macroeconomic factors – such as interest-rate cuts by the Federal Reserve, employment trends, or a slowdown in the tech sector – could alter the balance. Buyers should remain flexible and evaluate each property individually, as Spencer Hsu advises.
Key Takeaway
The Bay Area’s K-shaped housing market reflects the region’s economic disparities. High-income tech buyers continue to drive up prices for luxury single-family homes, while condos and townhomes offer discounts and opportunities for those on more modest budgets. Whether you’re upgrading to a multi-million-dollar property or stepping into your first Bay Area home, understanding these dynamics—and working with a data-driven real estate professional—can help you navigate one of the nation’s most complex housing landscapes.