San Francisco Chronicle - (Sunday)
Home costs up only slightly as firms go public
The recent stock market debuts of San Francisco’s Uber, Lyft, Pinterest and Slack — collectively worth more than $120 billion — sparked fears of even more frenzy in what’s already the country’s most expensive housing market.
But the latest figures show the city’s median single-family home price is up only 1.2% to $1.65 million in May compared with a year earlier, according to the San Francisco Association of Realtors. Condo prices have fallen slightly, by 0.7% to $1.245 million, and there hasn’t been a noticeable jump in activity, according to real estate brokers.
That could change later this year after the
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expiration of lockup periods, which prevent employees from selling stock until six months after initial public offerings, and as companies keep hiring new employees.
Though median prices overall grew only slightly, they reflect a rebound after prices fell last year, which could be partially attributed to a boost from tech demand. But for now, experts see a stable housing market.
“It’s no busier than last year. Prices are not significantly up from last year,” said Gregg Lynn, a broker with Sotheby’s International Realty.
The summer months of July and August are typically slow as prospective buyers take vacations. Lynn said sellers are waiting to list homes to avoid foggy weather that could dampen showings, rather than in hopes of more tech buyers.
“They’re waiting not for the tech, but for the weather,” Lynn said. “We’re expecting this fall to be a really robust period.”
The biggest challenge continues to be lack of supply.
Only 31 single-family homes in San Francisco received building permits in 2018, compared with 6,066 homes in buildings with two units or more, which have predominantly been rented. Only 216 single-family homes received building permits from 2014 to 2018, less than 1% of all units in that time period, according to the Planning Department.
“For every great house with a view, there are six families interested,” Lynn said.
Ted Egan, the city’s chief economist, estimated that the Uber, Lyft and Pinterest initial public offerings would lead to a 0.5% to 1.9% increase in housing prices.
Issi Romem, chief economist at real estate listings firm Trulia, also expects to see a modest effect from tech companies going public. He said he doesn’t expect housing prices to change significantly this year.
“I don’t think they will have no effect on the housing market,” Romem said, but “I don’t think they will have an Armageddon effect on the housing market.”
One factor keeping prices in check: Many Bay Area residents have simply given up on trying to buy where homes are the costliest in the country.
“We’ve exhausted demand. Homes are simply out of reach for a large enough share of people who want to buy,” Romem said.
Uber has about 7,000 Bay Area employees, while Lyft, Pinterest and Slack each lease enough office space to accommodate a few thousand employees. Only a fraction of those employees have benefited from the initial public offerings, Romem said.
There are signs, however, that the market is heating up after a slowdown that began last year. Redfin, a brokerage and listings website, said 35% of San Francisco homes listed with Redfin brokers experienced a bidding war in May, which it attributed to the tech IPOs. That’s up from 5% compared with January but down from the previous year.
Selma Hepp, vice president of business intelligence at brokerage Compass, said the market has rebounded after a rocky end to last year and may have benefited from more tech demand.
“We don’t know where the market would be right now without the IPOs. We could be seeing much larger declines,” she said.