A new wave of tech IPOs are projected to heat up San Francisco’s housing market, but will they push homeownership further out of reach for its residents?
An analysis from Redfin suggests that although recent IPO activity has ignited sales, homeowners are likely to feel the burn as home prices simultaneously rise.
Redfin Chief Economist Daryl Fairweather said this could ultimately contribute to wealth inequality in the area.
“The housing affordability crisis in San Francisco has been decades in the making, as its housing stock has failed to keep pace with demand. Without a significant increase in housing supply, prices will rise even further away from the typical resident’s budget and only people like wealthy tech workers will be able to afford a home in the city,” Fairweather said. “People like nurses, teachers, nonprofit workers and artists will continue to move further away from the city center, and many of them will leave the area altogether.”
According to the company, just 2.6% of homes available in San Francisco are affordable to homeowners earning the area’s median income. With the average home selling for $1.43 million, tech employees are expected to have the upper hand once Uber, Lyft, Slack, Pinterest and Airbnb go public.
“Every single homebuyer I’ve met in at least the last two months mentions IPOs and low rates as reasons to start their search for a property,” Redfin Agent Carina Isentaeva said. “I’m seeing our market become more active and more competitive, and I believe it will become even stronger in the fall.”
Isentaeva’s findings are spot on as Redfin’s latest bidding war report revealed the West Coast has now experienced the biggest year-over-year increases in first-offer success rates.
“2018 was a difficult year to buy a home in San Jose,” Redfin Agent Stella Phua said. “Very few homeowners were listing their homes for sale, and nearly everyone who did received multiple offers with few if any contingencies. Many buyers, especially first-timers or those who needed financing, were not quite ready to compete at that level. This year, buyers are more prepared to make strong offers, and there are more homes being listed, which is really helping.”
You can read more about the report here.