| The average 30-year mortgage rate has climbed back near 7%, up a full percentage point from its low earlier this year, and likely headed higher. In San Francisco, homes are still selling for a million dollars over asking, in cash. Both are happening this week, and understanding why explains a lot about who the AI boom is actually working for. Why rates matter for housing Higher rates raise the cost of borrowing. When mortgages get more expensive, fewer people can afford the same house, so demand cools and prices tend to follow. That’s the basic mechanism, and it’s why the bond market matters so much to home buyers. Rates aren’t just reacting to what already happened, they’re pricing in what’s expected next. Early September data showed booming business activity alongside rising input costs, and markets are now pricing better than even odds of another quarter-point Fed hike at both the October 27 and December meetings. That’s why Treasury yields have been climbing and why the 30-year mortgage rate followed them back up toward 7%.  A market where none of that applies That mechanism only touches buyers who need to borrow. In the Bay Area, a third of home sales this spring were all-cash. One listing in the Outer Sunset went out at $990,000 and closed at $2.5 million. A separate $6.5 million listing closed above $8 million. None of those sales depended on where mortgage rates sat. Redfin ran the numbers this summer: if OpenAI and Anthropic employees pooled their paper equity, they could theoretically buy nearly 29% of all homes in the San Francisco metro area, 20% from OpenAI, 9% from Anthropic. Nobody’s pooling equity to actually do that. The number just shows how much AI wealth has piled up in a small number of hands in one metro area, enough that a meaningful share of local buyers don’t need a mortgage at all. Our take Rates decide who gets priced out of a house and who doesn’t, and with more hikes now priced in for the fourth quarter, that squeeze is set to get tighter before it eases. Most buyers will feel that directly. In the Bay Area right now, a meaningful chunk of buyers never will, because their money isn’t borrowed. That gap says less about the Fed and more about how concentrated the AI wealth behind those cash offers has gotten. If you’re bidding against those buyers, remember the rate path isn’t the only thing working against you. The buyers who don’t need financing are too. And if you’re one of the people holding real AI equity yourself, skipping a rate hike isn’t the same as being financially secure. A cash purchase funded by selling or borrowing against a concentrated position carries its own risk, one that has nothing to do with where rates go next. |
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