As you may have read about in our newsletter last month, 2019 is slated to produce a long list of multi-billion-dollar IPOs from San Francisco Bay Area heavyweights like Lyft, Uber, Palantir, Pinterest, Airbnb, Slack, Postmates, and Instacart. According to Patrick Howell O’Neill, this will results in a massive and sudden injection of liquid cash into a region already infamous for having the nation’s priciest real estate.
While the impact may not be as sudden in the Santa Cruz County, as we’ve seen over the past few decades, changes to the economy over the hill will inevitably impact the Santa Cruz market. Whether it’s second homeowners, commuters, or investors looking to buy in less crowded, undeniably beautiful Santa Cruz, we will likely see some of that money on this side of the hill.
According to O’Neill, 211 techie buyers are projected to purchase property above $10 million and thousands expected will likely buy above $1 million. This may mean more all cash offers, quicker closers, and an increase in demand in the months following the IPOs. If you are a seller, this may be a good time to consider selling. Looking to buy? You may benefit from getting into the market before the IPO’s are launched.
Some savvy investors and those close to the tech industry are looking at these IPO’s in a different light. Some suggest that the large number impending tech IPO’s may be too much for the market to handle. Amongst other reasons, many investors point to the low, or negative profits of these high-valued tech companies — a trend that is reminiscent of the dot-com bubble. If we are indeed at the precipice of a bubble, a downturn in the economy, especially in the tech-sector, will likely translate into a decline in demand in this area, especially of luxury real estate. It may also translate into either a tempering or reduction in prices. Unfortunately, we can only speculate, but these hypotheses may temper the excitement that will likely come along with the IPO frenzy.
We will continue to track and write about the impact of these IPOs on the economy and our local real estate market, so please visit our blog for updates as this story unfolds.