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Comment by rixrax | Hacker News Reader

If most 2019 Bay Area IPOs succeed, some say this will introduce over 10,000 new millionaires to Bay Area [0]. And most of them are unlikely to leave and quite a few will likely want to have a house. I can only guess how this will impact house prices.

[0] https://www.google.com/amp/s/www.dailymail.co.uk/news/articl...

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California makes it very expensive to stick around since you pay a lot of income tax if you sell. Of course some will stay but a low 7 figure windfall pre-tax will not get you much house, especially if you need a bigger house to start a family, and many will be tempted to not pay a state income tax by moving out of state.

Depending on what form your equity takes, California may still tax you if you leave. For ISOs, it's relatively simple, if you're a resident at the time of the Federal taxable event, it's a California event. For RSUs and NSOs, it's California taxable for the portion of vesting that is California sourced: the time where you were a California resident, or working in California. (Caveat: the rules are vague, you're required to use a reasonable method of apportionment and work days is documented as a reasonable method)

Yes, mostly relevant for earlier employees of these companies that were awarded options that they’ve exercised but have not sold their shares (the taxable event)

What's the methodology behind 10,000 new millionaires?

In the community of rank and file engineers at unicorns, as I understand it, most people are expecting high five figure to low six figure windfalls. Will there be millionaires among very early employees and/or the C suite, sure, but that's maybe a couple hundred people at the largest companies.

So that's 10,000 people and the city SF Bay Area has 7.15 million, and 880k live in SF proper. It doesn't sound like it'd make a very big dent in prices.

What’s the float though, the number of homes for sale?

https://sf.curbed.com/2019/1/2/18165468/san-francisco-home-s...

About 2 years worth of new millionaires.

I think of the housing market here largely as “the latest crop of FAANG/unicorn millionaires duking it out to get the best schools for their kids”

sfgate reported that only on the order of like 5600 single family residences were sold in SF proper in 2018

Still, introducing 10k new millionaires will make a difference. How many multi-million dollar homes are potentially for sale?

Also consider that if someone is selling one such home, unless they're leaving the area or offloading an investment property, they're likely trading up (which means there's not a net change in the number of available multi-million dollar homes.

As a millionaire, I still can't understand how people buy houses here. You are dumping all of your money into a vastly overpriced asset (vs the rest of the country), with the hopes that in 30 years the valley will be minting multi-millionaires to buy you out so you can retire.

It's an undiversified portfolio. Sure you could afford a house if you put all your income towards it, but would that be wise?

Which is exactly why I don't think all of these IPO millionaires are going to buy. They're going to park their money somewhere -- whether they continue to hold company stock, or sell it in exchange for index funds -- there's a multitude of other options for what to do with their new-found wealth, and it's an unrealistic to think 100% of them will buy a Bay Area house.

From the article:

> Compass states 5,644 properties were sold in the city last year, 2,208 of those were single family properties and software employees represented more than half of the buyers.

10,000 home buyers would take 2 years to consume all SF properies and 4 years to consume single family homes.

That's assuming every millionaire wants to buy a house, and doesn't already own one. I think it's a bit charitable to say 100% of newly minted IPO millionaires are willing to extend themselves that far, especially with the widespread belief that we are are on the verge of a recession.

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