“All these IPOs are coming, and $150 billion to $250 billion are going to be unlocked in market capitalization over the next two years. All those newly rich tech employees are going to have a significant impact on the real estate market.” - Compass big data realtor Deniz Kahramaner
Thanks to the prospective public offerings of several large tech firms, Silicon Valley will likely see thousands of new millionaires vying for real estate in the next two years.
Already boasting some of the most expensive homes and neighborhoods in the United States, the San Francisco Bay Area is expected to see at least 5,000 employees across eight companies reap billions of dollars from initial public offerings (IPOs) in 2019. Airbnb, Pinterest, Lyft, Uber, Slack, Instacart, Palantir and Postmates are all slated to make IPOs, which could usher in massive amounts of new capital.
“All these IPOs are coming, and $150 billion to $250 billion are going to be unlocked in market capitalization over the next two years,” Compass big data realtor Deniz Kahramaner told Yahoo! “All those newly rich tech employees are going to have a significant impact on the real estate market.”
Representing the largest influx of millionaires since Facebook’s IPO in 2012, the new wave of wealthy techies will likely have the biggest impact on the luxury real estate market.
Kahramaner speculated that up to 2,400 of the new Silicon Valley millionaires could buy homes priced at $1 million or less, and about 200 might buy homes of $10 million and up. As a result, Kahramaner believes that there won’t be a single home in San Francisco under $1 million by 2024.
While luxury homes will see more competition, rents will also likely increase, Zumper CEO Anthemos Georgiades told Yahoo! Georgiades, whose company lists rentals and tracks pricing trends, said that San Francisco will probably see a 10 percent increase in rent prices.
Home values throughout Silicon Valley already dwarf the national median home value of $225,300, according to Zillow. The median home value in Palo Alto is $3,134,300, followed by Mountain View at $1,872,900, San Mateo at $1,421,800, and San Francisco at $1,378,200.
If history is any indication, the next wave of tech IPOs will create a lasting impact on the area real estate market. When Facebook went public in 2012, more than a thousand new millionaires created a measurable uptick in home prices, according to Zillow.
“When Facebook had its IPO almost seven years ago, home values in the census tracts where likely Facebook employees lived rose faster than in those not home to Facebook employees,” Zillow’s Jeff Tucker wrote. “More precisely: Every 10 Facebook employees living in a given census tract at the time of Facebook’s IPO in May 2012 were associated with an additional 1.6 percentage points of home value increase over that year.”
If the 2019 wave of millionaires’ home buying preferences are similar to their peers at Facebook, there could be big changes coming for Bay Area real estate.