Following the wave of IPOs hitting Silicon Valley, local real estate experts predicted that San Francisco would be overcome by a deluge of freshly minted homebuyers. One expert begs to differ.
Writing for TechCrunch, Trulia chief economist Issi Romem lays out six important factors to keep in mind. For one thing, not all employees in these newly public companies will have money to burn in the market. Also, not all of the new millionaires will want to buy a home, and if they do, they are likely to bid on homes "only up to a point." Says Romem, "Some spectacular bidding wars could make headlines... but they will most often be competing with everyday buyers, and while they may have more resources to bring to bear, they won’t be eager to spend more than they must."
The underlying cause of concern around this latest IPO surge and housing — the long-term erosion of housing affordability in the Bay Area — is serious. But the wise way of mitigating the upward pressure of the IPO wave on home prices is not to stoke fear of it, and certainly not to demonize the employees rewarded for creating it. Indeed, IPOs are just one of many ways in which wealth arrives in the Bay Area. Instead, the wisest course is “simply” to add more homes, allowing the local housing stock to accommodate more people — the well-heeled and less well-off alike.
