Fascinatingly, Kahramaner could even list the number of buyers from each tech company. They were concentrated in the older tech firms. The top five make sense: Google, Apple, Salesforce, Facebook, LinkedIn. What’s missing from the top of the list are all the soon-to-IPO San Francisco companies. His data show that their workers purchased only 37 homes in 2018 among all seven of the SF firms. By and large, their money is still on the sidelines of the real-estate market.
Which might be the worst news for San Francisco’s housing market. The amount of cash that will be flowing out of these IPOs absolutely dwarfs any previous IPO cycle. Kahramaner estimated the total valuation of the biggest IPOs to be at least $250 billion. A decent fraction of that will end up in the hands of employees. After talking with some investors, his team created a rough hypothetical “cap table,” which describes how much money various employees might make, depending on when they were hired. Using this model, Kahramaner estimated that 5,000 new buyers will be entering the market, and his team attempted to show at what price points they’d be able to buy. He foresees 3,885 new buyers looking for houses less than $3 million, in a market in which fewer than 6,000 homes total sell per year. At the top end, it gets even crazier—with more than 1,000 buyers looking from $3 million on up.
If you’re a Bay Area resident like me, you have probably reached the stage of reading a real-estate story where you’re hyperventilating into a bag in between vertigo spells. You imagine all these IPO money explosions resonating together, the blast racing out of SOMA, reaching your neighborhood and pricing everyone out as you become part of a secondary explosion, racing 10, 20 miles farther out to El Cerrito, Richmond, San Mateo, Fremont, Vallejo, pushing people there outward to Fresno, Austin, Portland, Denver.
You can picture the longer commute, feel the rent going up, the people getting pushed out of their homes one way or another. People fight simple neighborhood improvements because to be desirable is to be devoured.
But while in individual neighborhoods the IPOs will create intense pressure on prices, as a whole, these IPOs will probably leave only a small, but detectable mark on the Bay Area housing market.
For example, the market in Marin has appreciated, but it’s remarkably removed from San Francisco and Silicon Valley because public transportation there is limited. “It’s not like every day the phone rings and the guy on the other end of the line is like, ‘Hey, I’m a new millionaire,’” says Rob Spinosa, a vice president of mortgage lending at Guaranteed Rate in Marin County. “We’re not seeing that.”