San Francisco could be home to thousands of new millionaires by the end of 2019, and it's sparking a 'housing madness' in the already wildly expensive city
- San Francisco is expecting to see an increase in millionaire residents by the end of 2019 if some of its many tech start-ups go public as anticipated, according to Nellie Bowles of The New York Times.
- The Bay Area already has a high cost of living and a dire housing market that could get even more expensive over the next five years: Single-family homes could cost as much as $5 million.
- Changes are already in effect - buyers and sellers are already making real estate moves before any IPOs occur in a time of "spending wars," Bowles said.
America's richest urban area is about to get even richer.
By the end of 2019, San Francisco may be seeing an influx of newly minted millionaires, reported Nellie Bowles for The New York Times. Fueling this heavy cash flow, she wrote, are several tech start-ups hoping to go public, amongst them Uber, Lyft, Slack, Postmates, Pinterest, and Airbnb.
While the prices of these companies upon going public are yet to be determined, "even conservative estimates predict hundreds of billions of dollars will flood into town in the next year, creating thousands of new millionaires," Bowles wrote. "It's hard to imagine more money in San Francisco, but the city's residents now need to start trying."
That's something for a location already well-acquainted with wealth. The Bay Area is the wealthiest location of the 25 most populous metropolitan areas in the US, according to 2018 data by the US Census - the median household income brings in $98,710. It's also home to the third highest number of billionaires in the world, according to a Wealth-X census.
But there's one likely change in particular that San Francisco residents, perhaps not surprisingly, will need to acclimate to: A "housing madness," as Bowles called it.
An already expensive real-estate market could get even more chaotic
At a recent real-estate investor gathering, Deniz Kahramaner, who specializes in data analytics at real-estate brokerage firm Compass, told the crowd that, in five years, San Francisco would no longer see one-bedroom condos worth less than $1 million or single-family homes selling for $1 to $3 million, Bowles reported. Instead, San Francisco single-family homes could cost as much as $5 million, Kahramaner said.
And this is happening in what is already one of America's most expensive metro areas, where the housing market is known to be outlandish.
The median price of a home in the San Francisco metro area is around $900,000, Business Insider previously reported. In the city of San Francisco itself, a median-priced home sells for $1.6 million, Melia Robinson wrote.
It's so expensive that only 12% of households can afford homes there, according to Robinson. And nearly 60% of tech workers can't afford homes in the area - and that's on a six-figure salary; the average tech worker in the Bay Area earns $142,000 a year, according to a report by tech talent marketplace Hired.
This extreme housing market has left some people sleeping in cars or living in boats and vans. One tech worker even lived in his startup's office for a year because he couldn't afford rent.
And that's among those who stay - San Francisco's housing market is so dire that nearly half of its residents said in a 2018 Bay Area Council advocacy group survey that they plan to soon move away, Business Insider reported.
San Francisco's high cost of living is even causing 58% of tech workers to delay having kids, according to a survey by the tech worker app Blind.
What will happen when many of the Bay Area's residents add a few extra zeroes to their net worths?
The Bay Area's housing market is already undergoing changes in anticipation of the IPOs
The changes are already beginning to ripple: Renters are buying before the IPOs and sellers are taking their houses off the market and waiting to sell after the IPOs, Bowles reported.
"Even if just half the IPOs happen, there's going to be ten thousand millionaires overnight," Herman Chan, a Sotheby's real estate agent, told Bowles. "People are like, 'I'm not going to sell till next year, because there are going to be bajillionaries everywhere left and right.'"
With many of the big start-ups headquartered in San Francisco, it's likely workers will want to live in the city, Bowles wrote.
"The millennial tech workers are really looking for convenience," Christine Kim, president of Climb Real Estate, told Bowles. "They seem to not want to own cars, and food deliveries are really easy now, and they want to be close to entertainment, so they'll stay in the city."
And ultimately, it's shaping up to be a time of what Bowles called "spending wars."
Read the full New York Times article here »