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Perhaps you have heard that tech initial public offerings are blooming like wildflowers this spring. Lyft, Pinterest, Uber, Zoom, Slack and more are coming, almost all of them headquartered in the San Francisco Bay Area, which is already among the least-affordable places in the country. A lot of early employees of these companies are about to make a bunch of money on their stock options.

In a place where the median home price is $830,000, what’s all that wealth going to do to housing prices? Host Molly Wood talked with Glenn Kelman, CEO of Redfin, a real estate company that offers both brokerage services and data. She asked him what kind of data he has about what’s coming. The following is an edited transcript of their conversation.

Glenn Kelman: Redfin agents are working with some of these people who are borrowing money against stock that’s still locked up to be able to buy that house. We’re starting to see lenders say, “Even if you can’t sell the stock because you have to wait six months after an IPO, we’re willing to loan you the money because we think that bet is going to pay off.” Those are some of the numbers we look at. We think the ultimate effect on prices is going to be probably a three point acceleration in home prices. If you look at when Facebook, Twitter and LinkedIn went public a few years ago, take the normal price appreciation and add about three points to it. It’s not overwhelming. It’s not as if home prices are going to double in one year, but it is a significant effect.

Molly Wood: Obviously, this is not normal. It’s sort of a combination of the number of companies concentrated in one area, the valuations and the way these companies pay their employees.

Kelman: Normally you wouldn’t see so many companies go public all in one place. I think the way most economists look at housing is they measure its affordability by looking at the ratio of the home price to wages, but that has completely been unhinged in the Bay Area. The reason that place breaks all the laws of physics is because it doesn’t matter what your salary is, you’re using your stock to buy a house, and that stock is shooting through the roof.

Wood: It sounds like normally if there were a bunch of tech IPOs, there would be a sort of sense of euphoria maybe among real estate agents in San Francisco, let’s say. But it sounds like you’re saying that may not be the case here.

Kelman: Yes, I think that stockbrokers and jewelers and people who sell expensive cars are very excited about this, but real estate agents feel maybe a sense of dread, that the bidding wars we’ve become accustomed to are going to go to a whole new level. The reason that’s so is because you can make more jewels and cars, but houses, there are only a limited number of single-family homes in San Francisco. People are commuting two hours to teach at a school, to perform some other middle-class job, and we’re not building the housing to let those people live near where they work.

Wood: Forgive me if this sounds a little bit like wishful thinking as a renter in the Bay Area, but to what extent is this cyclical? Will San Francisco or even Oakland eventually have to become more affordable by default?

Kelman: The laws of supply and demand are already at work. That’s why people are renting U-Hauls and driving to Oregon. I do think that at some point, when houses get too expensive, price increases will ameliorate. I think in some ways, whenever there’s a huge tech rally, you always have some curmudgeon saying, “Wow, that bubble is going to burst.” I think some of the people who are advocates for affordable housing, for middle-class housing, are leading the charge this time. I don’t know if I want to characterize myself as a curmudgeon, but I left San Francisco to run Redfin 14 years ago, and I always planned to come back. One of my kids the other day said, “If we ever came back, do you think we could afford it?” I don’t know, man. I don’t know. If I’m worried about it, everybody else must be, too.

Related links: more insight from Molly Wood

Data released earlier this week found that housing prices in San Francisco fell 0.1% last month, the first drop in prices since 2012, and who knows, possibly the last one for another seven years.

The city of San Francisco’s Budget and Legislative Analyst’s office is even more pessimistic than Glenn Kelman, on home prices anyway. It estimates more like an 11% increase in prices resulting from all the IPOs. A separate real estate agent and data analyst said that if all the companies about to go public stay successful and keep bringing in new employees and paying them well, that prices could double over the next five to 10 years. That’s assuming, of course, that everyone doesn’t just move away.

Meanwhile, it’s not like the tech economy is suffering. Bay Area-based Twitter and Facebook turned in strong earnings reports this week, and Apple beat estimates, too, despite its lower iPhone sales. Alphabet, the parent company of Google and Square, was the only disappointment. But I’m not talking the kind of disappointment that leads to mass layoffs and thousands of people no longer having to commute to Mountain View. And nobody thinks Google is going out of business. No, no, for Bay Area residents, it’s all just too much of a good thing.

Article source: https://www.marketplace.org/2019/05/02/tech/silicon-valley-real-estate-market-tech-stock-ipo

Video

California’s surge in housing prices

Prism Capital SF CEO Rokelle Sun on the rise in housing prices in California and the state’s legislation requiring houses built in 2020 and after to be solar-powered.

The City by the Bay is bracing for a brand new tech boom triggered by a rebound of initial public offerings, partly driven by the rising stock market and rebound in the U.S. economy.

Levi’s, Lyft and Pinterest kicked off the IPO renaissance earlier this year and now investors will soon be clamoring for Uber, Airbnb, Slack, and PostMates, big-name startups with plans to raise hundreds of billions of dollars in their initial public offerings.

While Main Street investors get a fresh crack at new stocks to invest in, the deals also mean big paydays for employees who can cash in their stock options. By one estimate, the Bay Area could see up to 10,000 newly minted millionaires with money to spend on everything from luxury cars to lavish parties to real estate.

In San Francisco, already one of the most expensive cities in the world, the median home prices averaging $1.35 million, per Zillow, nearly double the average five years earlier.

UBER, PINTEREST, ZOOM, SLACK IPOS HAVE SAN FRANCISCO BRACING FOR NEW TECH BOOM

Even so, some experts say that could soon look like a bargain in a city already struggling with a shortage of affordable housing.

“Over the next five years, I expect rent prices and home prices to appreciate at least 50 percent. One hundred percent is also plausible. And we’re looking at a much more expensive city,” said Deniz Kahramaner, real estate agent and founder of Data Bay Area.

This tech boom comes just a few years after the explosive growth of companies like Apple, Google and Facebook saw the gentrification of middle-class neighborhoods, where longtime tenants were suddenly priced out.

Charter buses that shuttled tech workers to and from Silicon Valley became a symbol of income equality. The city’s chronic homeless problem and worsening traffic continue to vex government officials and residents.

San Francisco Supervisor Gordon Mar has proposed a new payroll tax on companies going public to offset the possible negative impacts of this infusion of wealth.

MIDDLE-CLASS WORKERS ARE VICTIMS OF SILICON VALLEY’S TECH BOOM

“We have the highest income gap and highest housing costs in the nation,” Mar said. “These crises are intertwined, and they didn’t happen by accident. Over the last decade, we have seen an incredible amount of wealth flood this city – wealth concentrated in the hands of too few, as our middle-class shrinks and our wealth gap grows.”

If approved by voters in November, Mar said the tax could generate up to $200 million in the first two years and pay for affordable housing. Critics contend more taxes will drive businesses out of the city.

Meantime, many Uber drivers are angry they’re not sharing in more of the wealth. On May 8, drivers in half a dozen U.S. cities plan to shut off their app for 12 hours to protest wages and benefits.

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Some drivers say they earn less than minimum wage after expenses. In addition to the blackout, hundreds of drivers are expected to take up pickets at Uber headquarters in downtown San Francisco, two days before the company goes public in what’s expected to be one of biggest tech IPO’s ever.

But don’t expect a buying binge immediately. Analysts said employees will have to wait out an initial lock-up period, which restricts certain shareholders from cashing out too quickly before they can cash in, so it could be at least a year before the impact of all these IPO payouts makes it from Wall Street to Market Street.

Article source: https://www.foxnews.com/tech/tech-ipo-boom-will-even-price-out-the-wealthy-from-san-francisco

In July, the family loaded up their belongings and drove away from the iconic and jarringly unequal city that had priced them out. Like so many before them, they steered their car toward the eastern reaches of Contra Costa County. There by the delta, where the Sacramento and San Joaquin rivers meet, is Oakley, a 20-year-old city of 42,000 with signs inviting you to tour new houses packaged as lifestyle brands: Bordeaux at Duarte Ranch Estates, Laurel at Emerson Ranch.

The spacious home the family bought in July for $640,000 brims with amenities, including the kids’ favorite: a whirlpool bathtub. Most important, it has room for a family of 13: Bolling-Tosuner, her husband, Mustafa Tosuner, and their three children, her mother, her sister and her sister’s six sons.

Bolling-Tosuner’s mother, Martha Simmons, said her own parents lost their San Francisco house to foreclosure in the 1980s and that it was her late mother’s dream for the family to own property again. Simmons, now 65, worked double shifts for years to save up for a down payment.

The family never imagined the dream would take shape amid the tumbleweeds, 50 miles from where they were born and raised.

Early one afternoon, Tosuner came downstairs, already dressed for his night shift as a security guard in a condominium building. He wasn’t in the mood to grumble about his four-hour daily commute, but he had the unfocused gaze of someone in need of a good night’s sleep. He had gotten home around 2 a.m, and his little girls, 1 and 3, were eager to see him when they woke up about four hours later.

“The commute is hard,” he said, “but other than that, I like the area. I’m happy in a quiet place.”

There is little use in looking back. The ex-San Franciscans have embraced their new life in the country. They also know it wasn’t a choice.

“We literally were forced to leave the city,” Bolling-Tosuner said. “There were no other options.”

?

Article source: https://extras.mercurynews.com/pricewepay/

Poll after poll find Bay Area residents anxious about housing, the cost of living, and the homeless crisis—and often suggest that those surveyed may not be long for the region.

The latest annual poll by the Bay Area Council (BAC), a business-sponsored public policy advocacy group, confirmed all of these trends yet again, but also found that most residents still consider the Bay Area a great place to live—in fact, respondents qualify the Bay Area as the “best place on Earth,” warts and all.

BAC conducted the survey of 1,000 registered voters in all nine Bay Area counties via email in March. Most respondents were from Alameda or Santa Clara counties—22 percent for each—with 12 percent of those polled hailing from San Francisco.

Many of the results are comparable to those found in similar surveys in recent years:

• Asked whether or not “things in the Bay Area are going in the right direction,” 57 percent of those polled said they believe the region is “on the wrong track.” This is up two percent from the 2018 poll. It’s also an inversion of the response from five years ago when 57 percent believed the Bay Area was going in the right direction.
• Asked about the number-one problem in the Bay Area, 43 percent said housing, up just one percent from last year but up 15 percent compared to 2017. Traffic and congestion came in second place with 21 percent. Homelessness was the third most common response and the biggest year-over-year gain with 20 percent, up from 14 last year.
• Only three percent of those polled said that the Bay Area was an affordable place to live. Ninety-six percent said otherwise.
• Echoing sentiments from similar polls, 49 percent of those surveyed said they are “likely” to relocate within a few years, up from 46 percent in 2018. Only 40 percent said they’re likely to stay.
• Despite this, asked whether they agree with the statement, “Even with its challenges, the Bay Area is still the best place on Earth to live,” 57 percent agreed, versus 39 percent not in accord. Note that this is the first year this question was asked.
• Of those polled, 74 percent called the Bay Area a good place to live. A smaller majority—55 percent—called it a good place to raise a family.

A plurality of those polled—28 percent—said they make more than $150,000 per year; five years ago it was 17 percent. The number of respondents making less than $100,000 annually is down to 38 percent in 2019, versus 56 percent five years ago.

(The number of voters who prefer not to disclose their income is also up, from 10 to 18 percent since 2015.)

A majority of those polled—75 percent—have lived in the Bay Area for more than ten years, down a bit from 78 percent in 2015.

In March, a Bay Area News Group poll of 1,568 registered voters in San Francisco, Alameda, Contra Costa, Santa Clara, and San Mateo counties found that 44 percent of those surveyed plan to leave the Bay Area, but only six percent had real plans to depart in 2019.

Chicago-based public relations firm Edelman released its annual Trust Barometer for California in February. Of the 500 Bay Area residents polled, 50 percent said they plan to leave California.

The same month Joint Venture Silicon Valley released its annual Silicon Valley Index and reported “for the third year in a row, people are moving out of Silicon Valley nearly as quickly as they are moving in.”

It’s important to note that planning to leave the Bay Area is not the same thing as actually leaving. Most Bay Area counties saw their population increase in 2017 and 2018.

In San Francisco, immigration buoys census figures in the face of domestic migration, although SF population growth has slowed in recent years.

Article source: https://sf.curbed.com/2019/5/23/18635944/bay-area-council-poll-2019-best-on-earth-san-francisco

In a feat once akin to moving mountains, the Bay Area housing market pushed the median price of a home in the region and in SF down year-over-year in April, albeit by small margins.

Core Logic

At the beginning of May, Orange County-based data firm Core Logic’s monthly home sales report reported that the price of a home in the Bay Area declined in April compared to the same time last year, the first time that had happened since 2012.

However, the drop was a barely-there 0.1 percent.

Now figures from other sources are in— although the specifics vary, they mostly corroborate Core Logic’s conclusions.

California Association of Realtors

The California Association of Realtors (CAR) released April figures that show an even bigger (albeit not huge) decline in prices across both the Bay Area and San Francisco.

CAR, which compiles the sales of single-family homes on the MLS, showed a 2.2 percent year-over-year decline in median prices for all nine Bay Area counties, from just over $1 million in April 2018 to $988K this year.

The difference in San Francisco itself was smaller but still significant: negative 1.1 percent year-over-year, from $1.65 million in 2018 to more than $1.63 million this year.

Similar to Core Logic’s figures (which differ from CARs, in part, because they also include condo sales), that dip is so small as to qualify as nonexistent in practical terms. But the fact that prices definitively did not rise is arguably more important.

Compass

SF-based Compass real estate group’s monthly report, released earlier in May, found a similar decline in the median single-family home price, presenting essentially the exact same figures CAR provided.

Compass found a smaller 0.95 point decline year-over-year than CAR did, but that’s because the report uses slightly more exact figures, rounding off to the nearest hundred dollars; in practical terms, the two analyses show pretty much the same activity.

Compass economist Patrick Carlisle writes that this isn’t a big enough change to be called a true drop—at less than one percent, it could just be statistical noise—but does note that “the most expensive housing market in the country has stopped becoming more expensive,” which is itself a little shocking.

Why the change? Carlisle’s analysis:

Monthly median sales prices are often affected by other factors besides changes in fair market value—for example, the extreme seasonality of luxury home sales. But [...] spring 2018 was one of the hottest markets in history, with dramatic year-over-year price appreciation. The market then cooled, stock markets turned scary, and interest rates climbed. 2019 has heated up again, but, so far, without any year over year median price gains.

Re/Max

Looking at a slightly bigger picture, real estate company Re/Max issued a report last week showing that while most major cities saw housing prices climb year over year in April—the average across 54 metro areas was plus 2.1 percent—San Francisco was among three that saw declines, down 1.4 percent locally.

Unlike CAR, Re/Max includes condo sales in its totals as well.

What does it all mean?

Possibly not much; no market goes up forever; the declines are all small; and, at most, the changes represent a stall after year upon year of constant growth. Until bigger trends emerge through spring and summer, any other conclusion seems hasty.

Still, market pushback finally landed a blow on the champ, which is always a development worth of comment—and possibly caution.

All year long, speculation has run rampant that a new round of initial public offerings (IPOs) from tech giants would strap a rocket to the Bay Area market, the New York Times dramatically predicting that the city will soon be “drowning in millionaires.”

In fact, Carlisle’s fellow Compass economist Selma Hepp declared in May that the upward trend had already begun, citing April increases in the number of home sales (but not in prices).

Fred Brousseau, director of policy analysis at SF’s Budget and Legislative Analyst’s Office, warned in an April memo to SF lawmakers that SF home prices could rise an average of 1.8 percent for each major IPO.

On the other hand, Issi Romem, chief economist for the real estate site Trulia, offered the opinion this month that, although the IPO boost “is substantial and will influence San Francisco real estate,” the anticipated effects are overblown.

Romem predicted that the wealth created for most shareholders will be modest, that sales will happen gradually rather than all at once, and that they’re likely to be spread out around the region rather than huddled up in SF, resulting in muscular but non-catastrophic increases.

Thus far, newly public SF companies have performed marginally, with Lyft and Uber still trading below expectations. Pinterest surprised with a stronger showing but declined this week.

Article source: https://sf.curbed.com/2019/5/24/18637954/sf-median-home-price-declines-april-2019