Messaging platform Slack Technologies has kicked off what many believe will be a major year for initial public offerings in the technology sector. Experts say that could have major implications for home buyers and owners in the San Francisco Bay Area.
For residents of the San Francisco Bay Area and its surrounding communities, these IPOs could make it more difficult to find a home at an affordable price.
Slack confirmed Monday that it had filed IPO paperwork confidentially with the Securities and Exchange Commission, after having garnered a $7.1 billion private-market valuation back in August. Slack is just the first of many San Francisco-based tech companies expected to go public this year — others include Uber, Lyft,Airbnb and Pinterest.
For residents of the San Francisco Bay Area and its surrounding communities already swimming in money from Silicon Valley millionaires, these IPOs could make it even more difficult to find a home at an affordable price, especially if these companies’ employees are among their neighbors, according to a report released Tuesday by real-estate website Zillow
Also see: Uber’s chaos is a great argument for going public quickly
Every 10 Facebook employees living in a given U.S. Census tract at the time of the IPO were associated with an extra 1.6-percentage-point rise in home values.
Facebook Chief Executive Mark Zuckerberg, and other companies and philanthropists in the Bay Area said last month that they plan to raise $500 million for affordable housing, The Wall Street Journal reported. This announcement came just weeks after California Gov. Gavin Newsom asked the private sector to do more to address the home shortage.
Zillow examined the link between Facebook’s IPO
in 2012 and rising home prices across the Bay Area and found that home values rose more quickly in neighborhoods with higher concentrations of Facebook employees after the social network became a publicly-traded company.
Specifically, every 10 Facebook employees living in a given U.S. Census tract at the time of the IPO were associated with an extra 1.6-percentage-points increase in home values over the following year, the report said.
In dollar figures, the median value home in a neighborhood with a high concentration of Facebook workers rose by an extra $20,800 between May 2012 and May 2013. Zillow cautioned that it couldn’t determine whether Facebook’s IPO alone caused that increase, as other factors likely drove home prices higher in those areas.
Nevertheless, homeowners who live in areas with a higher concentration of workers from companies planning IPOs should expect to see those corporate actions affect their home values, said Zillow director of economic research and outreach Skylar Olsen.
And that could provide a boost to the region’s housing market, which has cooled in recent months after years of skyrocketing prices, fueled by high demand. “These housing markets are slowing down,” Olsen said. “Something that may break that fall is the influx of money coming from these tech IPOs.”
In particular, employees of companies that go public may receive bigger paychecks following an IPO, or shares of the company they already owned could grow in value.
Homeowners who live in areas with a higher concentration of workers from companies planning IPOs may an increase in their home values.
Those extra funds could then make it easier for these workers to come off the sidelines and become first-time home buyers. In turn, that will create more competition for homes, particularly in neighborhoods near the company’s headquarters, which could then price other consumers out of the market, Olsen said.
The lessons learned from Facebook’s IPO don’t just apply in the San Francisco area. Olsen said consumers can expect to see a similar outcome near the headquarters of any company that has a notable IPO. However, many of the employees who work for major tech firms are younger and, therefore, more likely to be a first-time home buyer.
IPOs also aren’t the only corporate action that can have an effect on home prices. Zillow previously found that Apple’s
release of the first iPhone in 2007 was associated with higher home value appreciation in neighborhoods near the company’s headquarters in the following year than in the communities surrounding other major tech companies that didn’t release a major new gadget.
Jacob Passy is a personal-finance reporter for MarketWatch and is based in New York.
We Want to
Hear from You
Join the conversation