Home-Value Surge After Facebook IPO Provides Insight For 2019

Areas with more Facebook employees saw home values increase by $29,800 more than the general San Francisco Bay Area in the year after Facebook's IPO

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Zillow

Feb 05, 2019, 08:00 ET

SEATTLE, Feb. 5, 2019 /PRNewswire/ -- Facebook's IPO led to a wealth boom in the San Francisco Bay Area, and home values grew faster in places where likely Facebook employees lived than in the surrounding region, according to a new Zillow® analysis. Several tech companies with similarly high valuations – including Uber, Lyft, Slack and Airbnb - are expected to go public this year, which could lead to another surge in new tech money in the Bay Area.

Home values in Census tracts whose residents include likely Facebook employees increased more than other tracts where Facebook employees did not live after the company's May 2012 initial public offering, the analysis shows. Between March 2012 and March 2013, home values where likely Facebook employees lived grew 20.9 percent, compared with 16.8 percent for the rest of the Bay Area. That translates to a $29,800 difference in appreciation in that first year after Facebook went public.

Home values increased by an additional 1.6 percentage points for every 10 Facebook employees living in a given Census tract.

The Bay Area local housing market is already the most expensive in the nation – a typical home in the cities of San Francisco or San Jose is worth more than $1 million.

A 20 percent down payment on the median San Francisco home – $274,960 – is more than the value of a typical home in several major cities, including Chicago, Dallas and Nashville.

The influx of cash that employees of these tech companies may get following an IPO could be a significant contributor to a down payment. In San Francisco, 36.3 percent of buyers used investments or stocks to fund a down payment, well above the national average of 26.3 percent of buyers.

"The Facebook IPO and its sudden impact on Facebook employees' ability to pay arguably made a big impact on home value growth in that first year," said Skylar Olsen, Zillow Director of Economic Research and Outreach. "That IPO came at a time when home values were in their trough, and down payments were more attainable. Today, home prices have never been higher, though appreciation is slowing dramatically. Buyers often need exceptionally high incomes, or a sudden windfall that an IPO could provide, to break into the market. While we may still expect this year's tech IPOs to impact the local housing market, it may be more about easing the fall than acting as a springboard for accelerated future growth."

To conduct this analysis, Zillow identified the Census blocks where Facebook's Menlo Park headquarters are located. Facebook accounts for the vast majority of employment in these four Census blocks. We then found where people who worked in those Census blocks lived, using data from the LEHD LODES program. For a detailed methodology, visit Zillow Research.

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Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

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