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- Three recent studies have shown initial public offerings have an impact on the prices of housing surrounding a company’s headquarters, according to a report from San Francisco Chronicle.
- A handful of Bay Area tech companies with valuations in the billions are expected to go public in 2019, which will ultimately send CEOs with cash into the real estate market.
- San Francisco-based companies like Uber, Lyft, Slack, Airbnb, and Pinterest have either filed or expressed interest in going public in 2019.
San Francisco housing prices have hit record peaks, but get ready for them to skyrocket.
Tech execs flooded with cash and fresh off initial public offerings will likely flex their wallets in the real estate market, driving up prices and suckering out other buyers, according to three recent studies and a report by San Francisco Chronicle.
A wave of Bay Area-based tech companies are expected to file for initial public offerings in 2019, a handful of companies with multi-billion-dollar valuations already doing so in recent weeks. Slack confidentially filed to go public on Monday, while Lyft and Uber submitted early filings in the same week this past December. Airbnb is also hinting at a run to Wall Street, as well as Pinterest.
A study titled “Cash to Spend: IPO Wealth and House Prices” looked at the impact of IPOs on local housing prices in California from 1993 through 2017. What the authors found was that home prices within a 10-mile radius of a company’s headquarters rose by 1%, compared to that of the rest of the country. The bigger the valuation, the study found, the bigger the impact on surrounding neighborhoods. The study examined housing price indexes three months prior to IPO, filing, and when employees were free to sell stocks (known as the lockup period).
Younger startups going public had a bigger impact on home prices than older companies of the same size, the study said, because younger execs tend to live closer to work.
In another study titled “Local Economic Spillover Effects of Stock Market Listings,” researchers found that IPOs have spillover effects on local labor markets, business environments, consumer spending, real estate, and migration. Houses deemed “expensive” rose 1% in the areas surrounding the IPO headquarters. Co-author Larry Fauver told The Chronicle that IPOs did not affect the prices of less expensive homes.
The most recent study, released by Zillow on Tuesday, examined the home lots near Facebook’s Menlo Park headquarters after the social network went public in 2012. It found that home values grew faster in areas home to lots of Facebook employees – more than 20% from March 2012 to March 2013. Many of the employees were first-time home buyers, converting their stock into a roof over their head.
However, the fact remains that San Francisco is currently the most expensive city to live in America. The city’s median home price is $1.61 million, and the average apartment rents for upwards of $4,000. Raising housing prices just 1% percent would make the city even more unattainable for non-tech workers, and may effectively create a city for only the elite.