Bay Area housing market shifting in anticipation of IPO demand

Executive Summary:

  • IPO expectations are already showing up in home sales activity, particularly in San Francisco and San Mateo
  • Sales of homes in San Francisco, San Mateo and Alameda have solidly exceeded last year – up 7 percent, 4 percent and 2 percent respectively year-over-year in April
  • Santa Clara, Wine Country and Contra Costa remain slower compared to last year
  • Homes priced between $1 million and $2 million continue to struggle, except in San Francisco and San Mateo, likely a result of tax reform changes and reduced state and local tax (SALT) and mortgage interest deductions
  • Nevertheless, sales of homes priced above $3 million have surged again, posting a 5 percent year-over-year increase, matching last year’s peaks
  • While growth in inventory of homes for sales is broad based, availability of homes priced above $3 million accelerated again to a 26 percent annual growth in April
  • While price growth remains flat in most regions, San Francisco median prices up 2 percent year-over-year in April
  • A 9 percent annual increase in homes under contract suggests buyers are back in droves, especially for homes priced over $3 million, up 44 percent year-over-year

No buyers in SCC:

You just posted the opposite yesterday :exploding_head:

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I didn’t draw any conclusions. I am just assembling clues to see which way the wind is blowing.

I’d trust my own observation instead of some RE blog that writes for its own agenda.

Are you being a stubborn mule again? SMH…

Your inconsistencies are getting out of control…don’t say I didn’t warn ya…

Check your assumptions at the door and let data be your guide.

SF >> South Bay. Most of the IPOs in SF so it’s pretty easy to see where the wind is blowing.

Goog, aapl will slow down or already slowed down. FB is also questionable. Semiconductor may lose 45% of its sales if Trump bans chip sales to China. South Bay is scary with its 2M house renting at $4500 per month

Second, the segment of the market that continues to struggle are homes priced between $1 million and $2 million, except in San Francisco and San Mateo, which is not surprising in lieu of IPO expectations. Weakness in this price segment is likely a result of tax reform changes and reduced SALT and mortgage interest deductions, which are potentially a big concern for would-be buyers in this price range.

Third, the higher priced market, above $3 million, bounced back to a 5 percent annual increase after significant declines in the previous six months. The jump is mostly due to the tri-region of San Francisco, San Mateo and Marin, where sales accelerated compared to last year. As noted in previous analyses, sales of homes priced above $2 million were growing at a rate of 50 percent in early 2018, thus April’s flat change for homes in the $2 to $3 million range, and a 5 percent increase for homes $3M+ put higher-end sales back on track with 2018 highs.

This may have something to do with the tax reform. People buying 1-2M houses will likely pay more taxes because of SALT limit. People buying 3M+ houses are those who benefit from AMT changes.

95% of the buyers are ignorant about tax law changes and hardly have time or expertise to see the tax impact. The impact is small anyway. People are mostly too dumb to figure out the tax impact including the author

If people are too dumb to figure out the exact tax impact, they would just assume the worst.

No, they just dumb down and ignore all tvis noise and assume zero impact on their home purchase

I don’t think people with the income and savings to pull off a 2M home purchase are that dumb. Most have heard about the SALT limit. If they already own a home they knew the details from this year’s tax filing.

In order for the price to go higher, we need an increase in buyers who can afford to buy. In South Bay, that count is diminishing because large companies aren’t expanding. It doesn’t matter if an exec at Google makes $10M, s/he will only buy 1 house.

In SF, regardless of shitshow in stock market, the # of employees with liquid asset is thru the roof. They won’t be buying $5M SFHs in Marina, but they will be buying $1.5M~2M in Mission Bay or in Noe/Bernal etc.


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:+1: They are expanding elsewhere such as Austin :partying_face: where you can buy affordable SFHs in a family friendly neighborhood in good school district.

Condos :slightly_smiling_face: Singles and DINKs enjoy condos and walking distance to entertainment :slight_smile: SFHs are harder to maintain, is worthwhile only if you have kids and want family friendly neighborhoods. The sudden rise of software industry means the bulk of the SWEs are pretty young and mostly Singles & DINKs.

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They will get rich next year instead. Watch Uber double in 2020. :innocent: