- White collar professionals were the predominant cash buyers among Pacific Union clients in the San Francisco Bay Area for the first half of this year.
- Retirees are another big group buying homes in the Bay Area for cash.
- Tech buyers represented a smaller than expected percentage of cash buyers but there was a strong correlation between tech boom and rents sky-rocketing.
The San Francisco press would have you believe that the instant tech millionaires from Silicon Valley are the ones buying Bay Area homes with suitcases of cash, sending regional home prices sky-high.
But in fact, it’s the quiet achievers — the professionals toiling away in their corporate jobs and retirees who have put away a serious nest egg — who were the bulk of cash buyers scooping up San Francisco and Silicon Valley properties sold by the San Francisco Bay Area brokerage Pacific Union in the first half of this year.
John Burns Real Estate Consulting analyzed the 323 cash transactions from February to June and found investment bankers, consultants and other white-collar professionals represented 42 percent of cash buyers in this period.
Another big group of buyers in no need of financing were retirees, athletes, artists and students with trust finds, who bought 129 (40 percent) of the homes. Of this group, retirees led the charge — just as in other big U.S. cities like Chicago, according to John Burns Real Estate.
Tech buyers, often lampooned by the San Francisco press for driving prices up in the Bay Area, meanwhile, only represented 12 percent of buyers. International buyers made up 6 percent and 8 of those 18 buyers were from China.
Cash buyers represent between 25 percent and 35 percent of Pacific Union’s total buyer base, said Pacific Union International CEO, Mark McLaughlin.
McLaughlin also said there is still an argument for paying in cash.
“The 2008 equities stock market meltdown, real estate meltdown and general loss of equity in stocks and homes forced a ‘de-leveraging’ of the average American household,” he said. “Many consumers feel better paying cash for their cars and homes.”
“So while mortgage rates are low, so are rates paid on deposits — below 1 percent,” he said.
The Bay Area is still far more “affordable” than New York City, London or Hong Kong, he added.
The research also showed more cash-rich people were choosing to make the Bay Area their main home. John Burns found that two-thirds of buyers were snapping up primary residences in the Bay Area, while 31 percent were interested in properties as long-term investments and 3 percent were buying homes to flip.
Meanwhile, even though tech buyers may not be driving the cash market, the John Burns research drew a firm line between venture capital (VC) funding and the level of apartment rent, as it did following the dot-com crash of 2000.
The average VC deal size for the Silicon Valley Bay Area-based companies has jumped from $6.9 million to $23.5 million from 2010 to 2015, a 240 percent increase. At the same time, apartment rents in both San Francisco and San Jose have gone up by 71 percent.