Should You Wait Until After the Mega IPOs to List Your Home?

There's a lot of excitement and a lot of questions this summer with the big AI IPOs in the pipeline. Everyone is wondering what the impact will be on the Bay Area housing market.

In fact, a client preparing to sell a multi-million-dollar home asked a question we've been hearing a lot recently, "Should we wait to sell until after this big wave of AI IPOs?"

Our answer was simple: We probably wouldn't. 

There are several reasons why this is our recommendation. We thought we'd write up the logic to share with you why.

The first reason is what’s known in economics as the wealth effect which describes the tendency for consumers to spend more when asset values rise and spend less when they decline. The wealth effect shows that people often adjust their spending before wealth actually reaches their bank account because they already perceive themselves as wealthier.

Closely related is the concept of consumption smoothing, which teaches us that households make spending decisions based not only on what they earn today, but on what they expect to earn in the future.

Expectations of future wealth can raise consumption immediately, particularly in housing markets. Software engineers anticipating continued income growth or potential liquidity events may purchase more expensive homes today based on expected future financial strength rather than current income or rates. This forward-looking behavior appears in today’s Bay Area luxury segment, where inventory is extremely tight and competition remains intense, with San Francisco’s sales-to-list price ratio reaching 124% in May. 

Because of both the wealth effect and consumption smoothing, it is likely that many of the IPO winners are already active in the market today. Their anticipated wealth has already influenced their behavior, even if the largest liquidity event has not yet occurred.

IPOs Matter Less Than You Might Think

Modern financial systems facilitate consumption smoothing and amplify the wealth effect by allowing households access to liquidity independent of the IPO. In the last 15 years, new financial vehicles have emerged allowing people with private company stock wealth to sell shares directly to investors. These are what’s known as secondary markets. Many AI companies preparing for IPO have allowed their employees to sell some of their stock already via these secondary markets. 

The other facility that wealthy-on-paper employees have access to is the ability to borrow money with the shares as collateral. This technique has the additional benefit that the borrower does not pay taxes on the borrowed money, unlike selling stock. The cash is available for purchases like real estate.

Historically, the data shows that previous high-profile IPO periods produced surprisingly modest effects on local housing markets. Studies looking at the debuts of companies such as Google, Salesforce, LinkedIn, and Uber, did not find dramatic spikes in the market immediately before or after their public offerings. While IPOs can contribute to housing demand, the effect is generally smaller than many people expect.

It turns out that wealth is often created long before, or long after, the IPO.

The Stock Market Matters More Than Any Single IPO

Bay Area housing is more sensitive to broad equity market wealth effects than to individual liquidity events, because large index moves affect far more households than even major IPOs. A NASDAQ rally of 40–60% can generate far more consumption than a handful of companies going public. 

Nvidia illustrates this dynamic: despite going public over 27 years ago, its recent trillion-dollar appreciation has created more household wealth than many IPOs combined, expanding purchasing power across tens of thousands of employees. Leading AI firms remain relatively small employers—Anthropic and OpenAI each have just a few thousand employees in San Francisco—so their direct housing impact is limited compared to broad-based gains across the technology sector.

Waiting Has Risks

The assumption behind waiting is that future IPOs will unleash a new wave of buyers. Of course, waiting may indeed produce this additional upside. Perhaps stock markets continue rising. Perhaps IPO activity accelerates. Perhaps buyer confidence improves further.

But waiting also introduces risk. History reminds us that market sentiment can change quickly.

We witnessed this in 2022. Companies that appeared unstoppable suddenly lost significant value. Technology stocks corrected sharply. The wealth effect that had fueled luxury housing demand weakened. Buyers became more cautious, particularly in the $5 million-plus segment. Luxury markets across the country experienced a slowdown in 2023 as financial wealth contracted.

The same forces that support buyer confidence today can reverse unexpectedly tomorrow.

The Money is Already in the Market

The wealth effect and consumption smoothing tell us that people often spend based on expected future wealth, not simply realized wealth. Today’s financial tools facilitate these human tendencies.

The IPO may generate headlines but the wealth was likely acted upon long before, or long after, the opening bell. The buyers you are waiting for may already be in the market today. Plan accordingly.