IPOs, IPOs Everywhere and Not a House to Buy

Compass Chief Strategist Dr. Selma Hepp and Patrick Carlise share their thoughts on the potential for another ‘renaissance’ in Bay Area housing as a direct result of a handful of tech “Initial Public Offers,” otherwise known as IPOs, expected to go public in 2019. Curbed SF probably wrote the most measured coverage and can be read here but read on for the highlights.

Another Shift in Market Dynamics

Here’s a realtor’s twist on the Chinese proverb. The best time to buy a house was twenty years ago. The second best time is today. If companies like Uber, Airbnb, Pinterest, and Slack have successful IPOs, then that sentiment is accurate. The four tech companies are headquartered in San Francisco, and it’s estimated that their combined IPO valuations could reach $176 billion and produce another 6,000 millionaires theoretically competing for an already limited housing stock. San Francisco sells about 6,500 home per year.

What Does that Mean for Bay Area Housing?

They say history repeats itself, though it’s impossible to say whether these IPOs could have the same impact here as Facebook did in late 2011. According to Zillow, the “Facebook Effect” led to a 21 percent increase in home values in those areas where company employees were most likely to live, compared to a 17 percent increase in all other Bay Area regions.

Dr. Hepp goes into quite some detail about the Facebook effect, but suffice to say the impact was significant. This time around, however, things are a little different. Understanding that going public doesn’t guarantee wealth for everyone in the company, there are a number of restrictions and waiting periods and rules. The current market can’t be overlooked either. With median home prices in the Bay Area around 2.2 times higher than they were in early 2012, we’ll have to wait and see how things play out.

CNBC coverage can be found here.

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