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Technology

San Francisco house prices explode in the first half of 2018 as tech boom shows no signs of slowing

The average price of a house bought in San Francisco rose by $205,000 in the first half of 2018, the largest six-month increase in history, according to MLS data compiled by local real estate agency Paragon.

The average house in the city limits now costs $1.62 million. Condo prices also rose by $71,000, which is a significantly slower pace of change than in past years, but still comes in at a startling $1.21 million.

This is a direct outgrowth of the current tech boom in Silicon Valley, which shows no signs of slowing down.

It’s worth recalling that a lot of people in Silicon Valley were bracing for a slowdown in 2015. Venture investors like Bill Gurley were predicting that long-running start-ups would have to raise rounds at lower valuations because their last rounds came with restrictive conditions for future investors but they weren’t ready to go public yet. Start-ups cracked down on expenses. Apple’s share price actually dropped during the year, as investors grew concerned about slowing iPhone sales and the prospect of a general downturn. The next year, Silicon Valley stalwarts Intel and Cisco both laid off several thousand employees apiece.

Indeed, housing prices in SF actually slowed their growth in 2015 and 2016, before starting to rocket up again last year.

What changed?

  • Softbank’s $100 billion Vision Fund, which kicked off in 2017, has injected massive amounts of new money into the Valley’s start-ups, with investments starting at several hundred million dollars apiece and, in some cases like Uber, buyouts for earlier investors. As Softbank floods the market with capital, traditional VCs like Sequoia have also stepped up their game with massive new funds.
  • The tech IPO market is having its best year in ages, particularly for enterprise software companies that came of age during the current boom, like Dropbox (founded in 2007) and Zuora (2006).
  • Local tech giants are doing better than ever. Apple, Alphabet, Facebook, Netflix, Salesforce and others continue to grow their revenues, share prices and employee numbers. Whatever slowdown investors were expecting did not happen.

There are other factors in San Francisco’s housing prices, including an extreme lack of new housing supply and foreign investment. But as the tech industry continues to power the entire U.S. economy, it only makes sense that its capital becomes an ever more desirable place to live.

Source: Tech CNBC
San Francisco house prices explode in the first half of 2018 as tech boom shows no signs of slowing

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