A lot of people seem to think that house prices in the Bay Area will rise significantly after the Facebook IPO. It's fun to speculate about, but those people seem to be assuming a lot. Here are some of those assumptions I'm not so sure about:

1. Facebook will add a significant number of new millionaires to the Bay Area.

2. Everyone that benefits from the Facebook IPO will want to invest that money in a house, instead of into the stock market, retirement, cars, etc.

3. Everyone that wants to invest their option cash in a house will buy shortly after they liquidate their options.

4. Most of Facebook's new millionaires will buy houses in the Bay Area.

5. The supply of housing for multi-millionaires is inelastic.

6. The people buying new houses will not be vacating their old ones.

I'm not so sure that those assumptions are good ones. A San Francisco Chronicle article from 2009 said that there were 136,000 millionaires in the Bay Area in 2009, a number that has surely risen since then. Facebook has 3500+ employees, and on the high side I would guess maybe 1500 are going to earn enough money from the IPO to change their lifestyle, This would add about 1% to the Bay's total, assuming all of Facebook's newly minted millionaires live in the Bay Area.

If anything the prices of houses at the very high end (10 million plus) will rise. But it's hard to feel very sorry for people that are priced out of that market. If anything a housing shortage here may help remove or loosen some of the Bay's many restrictive housing and zoning laws.

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