Compass’ chief economist has his eye on the AI housing boom 

Over the past few years, real estate agents have been anxiously watching the market for positive signs that will get consumers off the sidelines as varying obstacles — like tariffs, inflation, overseas conflicts, stock market fluctuations and more — continue getting in the way. 

But Compass Chief Economist Mike Simonsen says the news isn't all bad — and even argues that this second quarter has been the strongest the U.S. has seen in terms of buyer demand in the past four years.

In a recent conversation with Real Estate News, Simonsen shared his thoughts on current rates and home prices, and noted that his attention is now fixed on San Francisco's housing market amid the AI boom.

The market's 'tug of war'

Although the economy continues to temper the housing market, Simonsen showed cautious optimism about current movements and where the market might be headed. 

While mortgage rates have reached a 2026 peak, they are still at the low end of the range seen over the past three years. Meanwhile, Q2 was the strongest second quarter since 2022 in terms of housing market demand, which Simonsen said was "really notable." Even those slightly lower rates have contributed to some positive momentum in pending sales, Simonsen continued, though it's unclear how long that may continue.

But there exists a "tug of war" between slightly rising rates, which may curb some buyer demand, and the "wealth effect" driven by the stock market hitting all-time highs and businesses reaching peak profitability. This "wealth effect" is driving demand among the upper classes, Simonsen added.

"One question this summer is: Which of those wins?" he said. "It depends on the market."

If rates don't fall from the upper 6% range, Simonsen predicts inventory will grow incrementally, which will put pressure on home prices by next summer. But 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.

The future of housing supply is still far from certain

The newly-enacted 21st Century ROAD to Housing Act provides some optimism for addressing the nation's affordable housing needs, Simonsen said. Though the new law will not solve the housing crisis overnight, "I do believe it's part of a bigger policy shift and awareness for improving supply, not just stimulating demand," he added.

While addressing the country's inventory deficit has been top of mind for many real estate professionals, some economists predict that the U.S. could actually be headed for an oversupply within the next 10 years due to changes in household formation, new immigration policies and declining birth rates, among other factors.

Simonsen agreed that current demographic trends are striking. But others, like older generations holding onto their homes longer and the growing rates of second homeownership, could also work to counterbalance a potential oversupply. For now, there are still many variables that could easily swing the current housing supply trajectory.

"It's not a foregone conclusion that the shift in the demographics suddenly means we have an overstock in homes, but it's a big deal," Simonsen said. "It's also really hard to see 10 or 15 years out in the future, what [might happen with] all these other variables."

Little impact of private listings on inventory, prices

Though the industry continues to debate the pros and cons of private listings, Simonsen said he hasn't seen any meaningful impact from a data perspective on inventory levels or home prices. The share of private listings in the market is relatively small, he explained, and they retain that status for a short enough time that they don't make much of a difference in the market at large.

"I think those [private listings] are more likely to be impactful for a strategy for any given seller than anything that would move the needle on inventory or prices," he said.

While Simonsen used to be of the "easy, intuitive" mindset that maximum listing exposure leads to maximum results, since joining Compass he said he has learned more from agents about their marketing strategies and has come to appreciate that many agents and sellers need a window for price testing.

He recalled the 2006 housing bubble, when he tracked tons of listings that were withdrawn and relisted 30 days later to reset the listing's price history and days on market. "I've been watching these relists over 20 years," he said, "and it says to me, these are folks who are only relisting because nobody's had a strategy, a system like the one that Compass offers, before."

With Compass' 3-phased marketing strategy, agents don't have to go through that process, Simonsen said. "They are now folks who don't have to relist because they get the price right to begin with."

The AI boom

AI's impact on housing is one of the most noteworthy things that Simonsen said he's been tracking — and the impact is "really dramatic" in San Francisco.

It has become common for homes in the area to sell for millions of dollars above asking as AI companies headquartered in or near San Francisco hire to meet demand — a trend that has been contained to San Francisco without spreading to other parts of the Bay Area or to other cities experiencing their own tech booms.

"The interesting thing over time that I'll be watching for is, does that wealth effect spread to other tech markets, to the East Bay, to the Bay Area?" Simonsen wondered. "Does it just take longer to get there?"

So far in 2026, Simonsen said he's tracked 144 residential sales in San Francisco that have sold for at least $1 million above asking, a big jump from the nine San Francisco homes that did so last year. By comparison, he said just one home in Los Angeles has sold for at least $1 million above asking so far this year.

"It's a crazy, unique thing in the market right now and it hasn't spread anywhere else yet."