Cash to Spend: IPO Wealth and House Prices


#1

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3329651

This study empirically demonstrates the positive impact of initial public offerings (IPOs) on local housing prices in California from 1993 through 2017. In the spirit of the difference-in-difference approach, we test whether hedonic price indexes increase after IPO events more for the areas around IPO firm headquarters. We use the IPO events of public filing, issuing, and lockup expiration to distinguish changes in the shareholders’ expected wealth, assessed wealth, and immediately available wealth, respectively. HPIs increase more within 10 miles of IPO headquarters than in the surrounding area by 1.0% after filing and 0.8% after issuing but approximately zero after lock-up expiration. This result suggests that original shareholders change their housing demand when their wealth changes but not when liquidity constraint is relaxed. The impact is larger when the wealth increase by IPO is larger; e.g., higher offer price, larger IPO proceeds, and larger share underpricing at filing. The impact is also larger for younger and smaller firms.


#2

Who cares about the extra 1.8% appreciation? It seems negligible. The correlation does not need such a research and paper, people already know.

This is the type of useless academics that proves that there’s a surplus of education


#3

#4


#5

This is an actual data point that says IPO’s may not have as much effect as many expected.

SOMA is where the IPO action is gonna be. Literally walking distance to many of the IPO companies and yet many properties there are still struggling to sell. You’d expect some buyers would try to front-run the market.


#6

When people make money in the city . They want to start families . When they want to start a family they want to goto peninsula .

May be not a huge data point. I know this month, a Russian couple who made ton of money bought a house in Mountian View . I know the address even but it wouid be too much to reveal .

They are all coming here !


#7

By peninsula, we usually mean San Mateo county :grinning: MV is in Santa Clara county. It is well-documented that singles/DINKs like urban lifestyle, family with kids like kid-safe (aka boring) neighborhoods which are mostly in suburban.


#8

Many factors involved but people like to use single variable polynomial. After so many years of double digital appreciation, the effect of IPO is not as great as when FB IPOed in 2012. In fact, there is a risk that investors taking advantage of the perceived bullishness to unload houses since there should be enough demand from those suckers sudden millionaires.


#9

This is a very sensitive topic, but Wikipedia lists MV, LA, and even parts of Sunnyvale as part of peninsula. :slight_smile: I say the boundary of peninsula is defined by 650 area code. Anything 408, it’s South bay.


#10

:laughing: Use of the word, “peninsula”, distracts the main point. Urban - Singles, DINKs. Suburb - Family with kids.


#11

Suburban can be all the way to Morgan Hill .

Close proximity to Stanford, MP/PA/MV/LA downtowns is urban enough to give these millennials the joys they are seeking from the Urbana but yet it offers larger lots ( than SF ) . So it’s happy compromise.

They are all coming this side .


#12

Only these places :scream:?

:face_with_hand_over_mouth:

Deductions: you are a millennial, combined net worth of more than $5M, work for Google,


#13

@hanera Yeah lot more options over here everywhere San Jose , Cupertino, Los gatos
For families to have fun .

I know SJ will experience the same UP impact when
google’s office will start to shape up . Right now people don’t see it but come 2025 the larger lots in San Jose with good schools and close proximity 4-5 miles willl become super rare and expensive .

It’s only a matter of time


#14

Which zip codes you think?


#15

I think Cambrian area of Un Uncorporated Santa Clara country in 95124. This is the area behind Cambrian Park Plaza ( intersection of Union Ave Ans Camden Ave ) . If you ever drive through this area it is filled with Mega a monster houses and all of the lots are either 10K , 16K and some are 20k lots . Decades ago The residents of these people voted against getting annexed into City of San Jose . Now , they enjoy relaxed zooming laws of county ( versus any city ) so that’s js why all houses are monster houses on these monster lots . This will be exact 5 miles from Google HQ in San Jose but all the schools are still 10-10-10 ( Carlton elementary , Union middle school and Leigh High School ) .

If you try to find close proximity ( 5 miles ) area with good schools then this is the only one . Almaden has good schooos but more than 10-12 mikes compares to Union /Camden un-incorporates Area . Willow Glen is even closer but sxhools ain’t great except Booksin elementary.

Whatever happened in 94097 area of Sunnyvale before people started to really Apple Space Ship shaping here or whatever happened in Rex Manor 94043 ( google canopy affect ) Ian going to get repeated again .


#16

Although i agree with you on great potential in this area, i guess the area with highest benefit due to google is either downtown or willow glen. It was MV and SV with so so schools which took the highest appreciation with MV google office.
Do ordinary google engineers really care about mansion on over 10k lot? I doubt it.
BTW, does this area have direct bus/light rail to diridon? 5 miles is too long to walk or bike (i am not sure about bike lane) but google new campus will have very limited parking space. Thus, walking distance to direct public transportation to diridon station would also matter.
As for school, leigh/branham/pioneer are all 9/10 according to great school.


#17

Are there enough inventory for 100 Google Directors & above?


#18

We should ask @tomato . He really cared about getting a big lot .

5 miles using inside streets going up is less than 30 minutes ( Bascom , Leigh , Merdian , Almaden —- every few block there is a major artery going from hills to downtown)


#19

This area produces less than 5 -6 builds ( scrape the old ones and out a brand new luxury one ) every year


#20

@cloud,

Cambrian houses with large lots are popular with Caucasians (e.g. @tomato) especially Directors of mega cap (not just Google). However, they will buy the house not rent the house. This is a dilemma for a landlord, buying there is good for appreciation but hard to rent. For landlords, should aim for houses for rank-n-file :slight_smile: who generally prefer more bedrooms and large square footage, and doesn’t really care about lot size that much.