Home sales in San Francisco have contracted year-over-year for ten months in a row, according to groups like the California Association of Realtors (CAR) and the Orange County data firm Core Logic. But now SF-based real estate group Compass says that the trend reversed in April, citing anticipation of big initial public offerings like today’s Uber IPO.
Compass economist Selma Hepp writes in the group’s latest SF Market report: “While overall Bay Area housing market activity continued to post a year-over-year decline in April, the four percent decline was the smallest since July of last year. The decline was driven by fewer sales in Santa Clara County and Contra Costa, with a smaller contribution from the wine country.”
She adds, “San Francisco, San Mateo and Alameda, in contrast, posted solid year-over-year increases, putting their April sales at the highest levels in three years.”
According to Compass, which pulls its data from MLS and analytics company Terradatum, sales in San Francisco spiked seven percent in April compared to the previous year, with the biggest increase, 26 percent, in homes in the $2-million to $3-million range.
Across the nine counties, most locales declined in sales, from a two percent downturn in Marin County to 12 percent in Napa.
However, on top of the upward turn in SF, San Mateo sales jumped four percent and Alameda County eked out a gain of two percent.
Hepp specifically credits “anticipation of the impact of recent and upcoming IPOs [...] particularly in San Francisco” as the likely sources of the agitation.
Employees at recently public companies, like Lyft and Uber, are presently hobbled by the “lockout period” on shares they hold, so most newly minted tech millionaires aren’t out buying homes. At least not yet.
Nevertheless, Hepp projects that “buyers have been encouraged by favorable mortgage interest rates, more choices, and an influx of IPO[s].”
Hepp is more bullish about the tech set’s effect on home sales than Compass contemporary Patrick Carlisle, who told Bloomberg this week, “I have to assume that these IPOs will add some to buyer demand, [but] I find it extremely hard to believe that we will see a resurgence of the year-over-year appreciation rates that we saw last year.”
Even so, Fred Brousseau, director of policy analysis at SF’s Budget and Legislative Analyst’s Office, warned in an April memo to SF lawmakers that big-ticket IPOs are likely to drive up the price—but not necessarily sales—of homes in SF:
We applied the most conservative average increase per IPO [...] (1.8 percent) to San Francisco’s $1.3 million median sale price for a home to estimate the possible impact of up to six high visibility IPOs that have occurred or could occur in 2019.
[...] The higher estimate would represent an 11.3 percent increase in the median sale price for a home in San Francisco. This increase would be spread over one to two years, depending on when employees would be allowed to exercise their options.
Home sales in San Francisco and the Bay Area have been on a skid since last summer, declining for the tenth straight month in March, according to Core Logic’s monthly analysis.
The median price of a home across all nine counties also declined for the first time since 2012 in March, albeit by a mere 0.2 percent.
CAR reports that sales of single-family homes dropped more than 10 percent across the region in March, and more than 11 percent in San Francisco. Neither source has released April figures to compare to the most recent ones from Compass.
Uber priced its shares at $45 each, but the stock opened Friday at $42. According to the New York Stock Exchange, the price is up since trading opened but hasn’t hit the $45 mark yet.
Lyft opened at more than $78 in March, but immediately dropped and has yet to return to levels of its debut, trading around $55 this week. Only Pinterest has consistently traded above its initial price.
No matter how the stock performs, it still represents a potential huge influx of cash for employees and executives with options at those companies.
Slack, Postmates, and Airbnb, all based in San Francisco, are expected to make public offerings later this year.