ZVHI doesn't take into account additional confounding predictors such as house quality, improvements (zoned and unzoned), historic status (limits improvements and changes becoming a significant headache for buyers in SF), etc that play a role in impacting pricing in SF.
Also, realtors in the Bay Area now recommend underpricing in order to spark a bidding war due to information asymmetry (buyers know the price is low but so is inventory so you need to give a significantly higher bid to lock in) - Mercury News is going to release an in-depth investigation about this in the next 1-2 months btw.
> Also, realtors in the Bay Area now recommend underpricing in order to spark a bidding war
I sold my bay area house in 2018 and this was common then too. Sold for 17% above asking, but IIRC, we were expecting 10% over. A bit of a change from when I bought it in 2009 from a bank at $900 under the listing price. Fwiw, the zillow estimate is up about 33% from the sales price. Their listed comps are from nicer neighborhoods though.
Also, realtors in the Bay Area now recommend underpricing in order to spark a bidding war due to information asymmetry (buyers know the price is low but so is inventory so you need to give a significantly higher bid to lock in) - Mercury News is going to release an in-depth investigation about this in the next 1-2 months btw.