IPO millionaires may not be top factor in predicted spring rush on S.F. housing

April 12, 2019

San Francisco anticipates booming housing sales in spring, fueled by a stable of new millionaires with fresh IPO wealth, but another variable may also be at play.

San Francisco realtor Jennifer Rosdail said the low interest rate of 3.75 percent right now is really what’s behind the expected uptick in buyer interest. She said last spring they hovered around 4 to 4.25 percent.

Rosdail, a longtime agent with Keller Williams San Francisco, said that just this month she’s seen San Francisco houses sell at $800,000 over asking on the high end and all the way down to $75,000 below asking on the low end. She said home sales in the $3 million-plus market are the ones more likely to be affected by the new millionaires coming out of this season.

“I don’t know how significant a couple thousand of millionaires are – we have so many,” she said. “San Francisco is a humbling city to be a millionaire in.”

The San Francisco metro area has more than 314,000 millionaires – the 8th most in the world – and the third most billionaires with 74, according to Wealth-X’s 2018 global ranking.

Rosdail, who remembers interest rates for a 30-year mortgage as high as 6.75 to 7 percent more than a decade ago, said just a one-point increase in the interest rate represents a 20-percent decline in affordability for buyers. She said that at this point in spring, buyers can afford almost 20 percent more than they could in the fall.

“If interest rates went up a lot, that’s the only thing that’s going to calm it down,” she said. “I do believe that’s more important than the new millionaires.”

Nonetheless, much hubbub surrounds the direction the IPO herd will rumble in terms of second quarter housing due to the size of their financial potential.

For example, a recent report by real estate brokerage Redfin revealed that just through the wealth created from Lyft’s IPO, current and former employees of the ridehailing business could purchase every single home listed for sale in San Francisco in cash and still have about $12 million left over.

And with other San Francisco-based companies starting to come out of the gate, such as PagerDuty, which raised $218 million with its IPO on April 11, and Uber, which has now filed its paperwork and seeks to raise $10 billion from investors, it stands to reason that the market could soon see some new buyers out of this.

What’s more, some agents have had conversations with sellers who were thinking to catch the rush of millionaires by keeping listings off the market in early spring, said Patrick Carlisle, chief market analyst at Compass, one of the largest private real estate brokerages in San Francisco.

“If that’s the case, we should see those listing back on the market,” Carlisle said.