IPO and SFO

Sounds a bit like a robust airport code, or two of them at least.  Although the city may have to ultimately build another airport if this accelerated wealth trajectory continues, as things are already 10x more crowded (and pricier) for just about any place or thing.  Waitlists at restaurants, traffic, longer lines everyone – it’s only going to continue.

Lots of talk about the big year of IPO’s hitting the San Francisco market this year – Uber, Lyft, Slack, Airbnb, Pinterest and Postmates all are due to splash the public markets. There is no question there will be impacts, socially and financially, to the city and its surrounding areas.  Just how much of an impact and whether all of it will be good/bad is where you get some different opinions.    Even on the conservative scale, there will be hundreds of millions of dollars flooding into the city and with that will be many more millionaires.  Most of them very young (under the age of 40) and many will be ready throw money around like a Biggie music video.

Food and beverage industry certainly stands to make out well, right?  Yes, of course.  Retail, in general, should continue to thrive here in the city, as well, with people ramping up shopping habits for luxury items like watches and shoes, to revamping their entire wardrobe of casual-but-overpriced-clothing (the new “suit” in the tech industry).  What about real estate?  Surely it floods the market with more buyers and frothy-mouthed sellers, right?  Most likely, in both cases.

Already there are plenty of sellers that have pulled unique properties off the market that maybe had a tougher time selling, with visions of selling them to a millennial that doesn’t mind that the home is not suited for a family, etc.  Some pulled them in hopes of bringing a higher offer price out of would-be buyers if they simply stay patient for another year.  As for buyers, they will be flush with cash and naive (in a good way) to real estate leverage and simply pay what they need to in order to get the place they want.   This equation means a real estate market that goes from being strong to even stronger.  Like, “steroids” stronger.

It is no forgone conclusion, though that every IPO hits it out of the park and has a subsequent ripple effect of economic and real estate euphoria.  Remember SNAP and Groupon?  Both hyped as public splashes that would go down in history, but they ended up doing so for the wrong reasons, with ultimately neither having any major impactful touch on the markets.    As well, one must consider the lock-up periods that shareholders of these companies are attached to.  With many of them for nearly half of a year, it comes down to the company continuing to post positive news, growth, and (dare I say it??) a PROFIT.  So, while going public is a great thing and is to be celebrated in the free market and for its ingenuity, it is not always a sure bet that it pans out.

Let’s watch and see this year, but there is no question that the market (real estate) is going to benefit, regardless of what happens.  It will just be a question of how much.

 

To figure out what you need to do as a potential buyer to get your piece of this market, get in touch with me to talk about what steps you should take.

Email me for more information.

Millennials Getting THIS Right

For all the sh** we give millennials about not being serious about anything in life, data is showing that here in the Bay Area, they are taking home ownership quite serious. 2018 closing data is showing that buying a home is actually trumping nearly every other early life milestone – such as getting married, having children and even traveling in some instances.

Bank of America conducted an insight survey on millennials nationally and the concept of homeownership was the top priority or life goal for millennials surveyed, ranking out around 70%. Marriage was the next highest ranking life goal, with 50% of those surveyed saying it it was their top priority, followed by having children.

Equating homeownership with personal and financial success appears to be the driving motivation for this group. Strong guidance coming from corporate culture in encouraging workers to invest in their futures and put down roots, as well as parents assisting with down payments and/or co-signing for financing to help their kids qualify.

In the San Francisco and surrounding markets, many millennials are held up in the buying decision or process by the down payment they “think” they need, as well as myths about how much of a down payment is truly required, credit scores, and private mortgage insurance. Many younger buyers that I speak to feel that they need “perfect” credit to buy, or have misconception of what exactly affects credit. Others had no clue until we spoke that down payments can be as little as 5%, in some situations, and that getting “in” the market now and letting appreciation momentum do the rest of the work for them in building equity is actually better than waiting to save up a larger down payment. Perhaps most eye-opening for myself in these conversations with future/aspiring homebuyers are the gaps in knowledge on the debate of renting vs owning. Many still feel that renting will be either just as or even less expensive than owning in the long run. For these situations, I share “rent vs own” illustrations that show the tax benefits and long term wealth creation from owning real estate in this market.

For more information on the benefits of owning over renting, or clarying myths about the barriers to entering the market,   contact me anytime!