As SpaceX’s first history gives the public a small army of new billionaires overnight, the Southern California real estate market is facing a huge wave of buyers looking to upgrade their digs or maybe break ground on a second home, possibly driving up prices in some of the most sought-after areas.
Shares of SpaceX began trading on June 12 and ended the day having collected $75 billion and making founder Elon Musk the world’s first trillionaire. It was the largest IPO on record, more than double the 2019 offering by Saudi Arabia’s state-owned oil giant Saudi Aramco.
At least 4,000 current and former SpaceX employees are expected to become millionaires, with about 400 of them earning $100 million or more, said Andrew Benson, chief executive of Hill.com, an investment platform for trading stocks in pre-IPO technology companies.
SpaceX’s compensation philosophy has historically favored equity over cash wages, so this conclusion extends beyond managers and engineers to include non-technical employees, entry-level employees and even cafeteria workers.
Because SpaceX has the highest number of employees in Hawthorne south of the 105 Freeway, the spree to buy a house is expected to be more visible in the sandy area of the South Bay and the technological corridor “Silicon Beach” that includes Venice and Santa Monica, but it may be seen in other high-rise areas of Los Angeles-neighborhoods or distant second homes.
One buyer of SpaceX has been pocketing $32-million invested in tony Brentwood for months while waiting for an IPO, according to real estate broker Cory Weiss of Douglas Elliman.
“People are starting to look,” he said, and most will spend $5 million or more.
Melissa Pilon, a South Bay real estate agent with Compass, heard from one SpaceX buyer the day the company went public in the northern Redondo Beach neighborhood, and she expects to hear from other homeowners.
“I’m not sure how this is going to go, but I think real estate agents are feeling optimistic,” Pilon said. “I think there will be an increase, but I don’t know if it will be sustainable. There may be a slight increase in prices.”
The SpaceX IPO and the planned initial public offerings of OpenAI and Anthropic could generate millions in state capital gains tax revenue over the years as shareholders cash out.
Even without the inclusion of those IPOs, state finance officials this year raised their forecast for the revenue gains Californians will receive as a result of the massive stock market boom driven by AI companies. On average, profits are taxed at 10%.
Although SpaceX shares have fallen recently, current and former employees who have been granted shares or options will still come out winners if the stock stays above the IPO price of $135. Shares closed Friday at $153.23, up 0.15%.
It could take several months for the real estate market to feel the full effect of SpaceX’s millions, said Paul Habibi, a UCLA professor and real estate expert at Grayslake Advisors.
The most significant buying boom is likely to occur early next year, he predicted, after the usual close of stock sales ends in December. Collections of limited stock sales will be allowed in the coming months, however, and some real estate agents and banks are putting together strategies to help millionaires-in-waiting use their future earnings to get a loan.
Habibi expects the largest number of purchases to be concentrated in the South Bay, particularly Manhattan Beach and Redondo Beach, with some spillover into Culver City and possibly northern Orange County.
The amount of new money represents an increase in the cost of housing in neighborhoods that are already in hot demand, echoing a pattern that has occurred in the San Francisco Bay Area.
“An area like Manhattan Beach has about 11,000 houses, so it can have a big impact if most of those people decide they want to buy houses in those areas that have such a problem,” said Habibi. “Those markets are already among the lowest priced in Southern California and I would imagine that this new wealth creation will continue.”
Hermosa Beach real estate agent Ed Kaminsky agrees that interest will be in the South Bay, including Palos Verdes, and he has heard from potential SpaceX buyers. Their dream homes have ocean views, swimming pools and four or more bedrooms, which can be hard to find.
“There are a lot of buyers who were hired in the Palisades fire who want to buy now and combined with all the IPOs this summer, I think inventory in the South Bay could be tight,” Kaminsky said, “The question is whether we have the types of buildings in the market that they want.”
An influx of buyers looking to buy real estate in the South Bay could drive up short-term prices in the area, such as when Snap Inc., the parent company of social media app Snapchat, went public in 2017 at a $24 billion valuation, Habibi said. SpaceX by comparison was valued at $1.77 trillion.
“What’s exciting about Snap is that the workforce has been very cohesive on the Westside, and you can see immediate results in Venice and Santa Monica within a few months of the IPO,” Habibi said. “That had a noticeable and significant impact on that local housing market” that temporarily boosted prices in an already hot market.
“The amount of wealth and how it flows into LA is always very diverse and fluid,” Weiss said. “I’m not saying this is a sad thing and nothing like LA has ever seen before, but I know there are people who have been waiting for this to happen.”
Among them are potential buyers who have visited Century City condominiums, where the district’s most luxurious towers stand, he said.
Some buyers might want to buy a condo in a luxury full-service building in LA to use as a parking lot, Weiss said, while moving their family to a distant city or state where they could fly away on the weekends.
San Diego County should see an influx of new buyers with SpaceX dollars, said Del Mar real estate agent Kristina Quesada, owner of the Yost Quesada Team at Douglas Elliman. They will join the latest wave of house hunters from the Bay Area who are celebrating the fortunes of new technology and the enthusiasm for second homes or vacation spots near the beach.
Buyers want to “get that beach lifestyle” for less than it would cost at other California waterfronts, she said. San Diego County’s popular destinations run west of Interstate 5 from Carlsbad south past coastal communities such as Encinitas, Del Mar, La Jolla and Coronado Island. Prices start at around $2 million.
San Francisco real estate agent Butch Haze of Compass saw technological advances followed by the worst boom in home buying since the Internet gold rush of the late 1990s.
“Show me a good job market and I’ll show you a strong housing market,” he said.
San Francisco’s booming tech industry, which is seeing an increase in new business around artificial intelligence, could have a negative impact on the Los Angeles area, Haze said.
After making a fortune through an IPO or acquisition of their company, “single tech guys like to come down to LA to be around good people,” Haze says. “And they got their beach spot.”
