You, your co-workers, friends, neighbors and family in every other part of the country have read the now infamous New York Times article about the impending real estate chaos that’s poised to hit San Francisco after a spate of future IPOs comes to fruition.
While I applaud The New York Times and reporter Nellie Bowles for winning eyeballs and getting everyone talking, I’m not necessarily thrilled with the fallout among San Francisco buyer and sellers.
These types of pieces definitely land in the sensationalistic zone, and unfortunately cause a lot of stress and anxiety for those who aren’t on the verge of purchasing their first $5M home.
So I wanted to give you my take on the topic, if only to provide some perspective from a real estate agent who’s been through many types of markets over the past 15 years:
– Yes, there are several high-profile companies slated to go public this and next year. But whether employees will walk away with millions to spend is up for grabs. The IPOs need to be successful, shares need to hold their values and employees need to get through lock-out periods before they can liquidate that money. It’s anyone’s guess how all these variables will shake out.
– Not all the companies are going public at the same time, which means newly minted home buyers won’t be flooding the market simultaneously.
– No one knows what all the potential IPO beneficiaries’ plans are once they’re in a position to spend some money. Stay in SF? Retire elsewhere? Buy property in San Francisco, or maybe somewhere else?
– Real estate citywide will not be uniformly in demand. Most tech companies with San Francisco offices are centered in SoMa and downtown. Which means not every neighborhood in San Francisco will be ripe for IPO money. Employees commuting downtown will most likely focus on neighborhoods with relatively straightforward commutes and which offer popular retail corridors with good restaurants and shops. So I’m expecting areas like Pacific Heights, Cow Hollow and Russian/Nob Hills to be in demand, as well as neighborhoods like Noe/Eureka Valleys, the Mission, NoPa, Cole Valley, Dogpatch, and South Beach/Soma/Mission Bay—in short, the same ones that everyone puts on their wish list already.
– If you need to sell your home this year, sell it. Trying to time the sale of what’s presumably your largest asset with a bunch of staggered IPOs and their lockup periods will be a tricky thing. The market is very strong right now in the city, so sellers should expect to do well as long as their homes don’t present any major objections.
– If you’re considering buying a home, stay the course. There will always be competition, there are plenty of homes, and living in fear of an IPO buyer acing you out of that Parkside fixer is not worth the anxiety. Set yourself up for success by knowing what you can afford, having a solid loan preapproval letter, and focusing on realistic offer situations.