Facebook IPO is Juicing Silicon Valley Real Estate Prices to Crazy Levels

The impending Facebook initial public offering is pushing already-expensive Silicon Valley real estate to frenetic new highs.

The two months prior to the IPO announcement saw only 840 sales in the region. In dramatic contrast, sales in the last two months have almost doubled to 1,531, according to Guy Wolcott, the co-founder and chief executive of the company behind real estate app HomeSnap.

It’s not just sales. The median sales price is up 15 percent in the same time period, and the number of million-dollar-plus prices is up a staggering 159 percent since the Facebook IPO announcement.

These bargains won’t last

While that’s not a conclusive cause-and-effect connection (there’s a lot more wealth in Silicon Valley besides Facebook stock), the rising real estate prices do indicate that something big is happening. Once the IPO happens and employees’ lock-up periods expire, prices will go even higher.

Housing prices in desirable areas of California’s tech hotbeds have always been high, especially in San Francisco, Palo Alto, Santa Clara, and Facebook’s hometown, Menlo Park.

But in the last two months Silly Valley is just getting plain ridiculous. Think $5.5 million for this fairly large but hardly palatial family home. Or $4 million for a six year old home in central Menlo Park. The built-in wine cellar will help you recover from the inevitable sticker shock.

Fortunately, Facebook employees have a lot of cash coming. As of last year, Facebook employees owned around 30 percent of the company, worth perhaps $25-$30 billion when the company goes public.

Until the company does go public, selling those shares is difficult, but not impossible, and many have been selling privately on secondary markets like Sharespost for years.

Once the IPO happens, the biggest winners will be the earliest employees, investors, and top executives. According to Who Owns Facebook, Sheryl Sandberg will cash in to the tune of $1.8 billion, former employees Chris Hughes and Matt Cohler will take home $850 and $680 million, respectively, and current employee Jeff Rothschild will also pocket $680 million.

But even employees who joined later should do fine: According to this Quora thread, the average Facebook employee will realize about $2 million in the IPO.

“Staggering” market conditions

According to Wolcott, the current doubling of home sales is “staggering,” and the prices are continuing to rise rapidly. “All indicators are saying this is a hot market,” Wolcott said today, “and it’s hotter the higher you go up the price scale.”

Wolcott knows these numbers because he’s the cofounder of Sawbuck, an online real estate service that competes with the likes of Trulia, Zillow, and Redfin. Eight weeks ago Sawbuck released HomeSnap: a mobile real estate app that Wolcott calls “Shazam for homes,” referencing the popular music identification service. With HomeSnap, you take a picture of a home, and get huge amounts of data: if it’s for sale, price, lot boundaries, school district, tax information.

In eight weeks, HomeSnap has been installed 115,000 times and been used to snap 175,000 homes. And Silicon Valley is one of the hottest locations. Tony Palo Alto is number one. Nearby Redwood City is number two, and Facebook hometown Menlo Park is not far behind at number 4. Could all those Facebook millionaires-in-waiting be scoping the goodies?

Source: Venture Beat, John Koetsier

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Tech Rebound Gives Housing a Lift

Source: The Wall Street Journal
By YUKARI IWATANI KANE


 
The resurgence in the Silicon Valley tech industry is leading to a new boom in the area's real estate market, with rising rents and a scarce supply of homes to buy.

Sid Vismanathan, who sold his start-up to LinkedIn in January, purchased a three-bedroom house in Mountain View for $700,000.

When Ann Schneider advertised her 1,782-square-foot, three-bedroom town home in Mountain View for rent on online classifieds site Craigslist earlier this month, she was surprised to get nearly a dozen responses right away.

The modest house has a two-car garage and a backyard, and she had redone the master bath and repainted the walls so it looks in better shape than comparable units in the complex. But she also raised the rent 60% to $4,000 a month.

Nevertheless, she had one potential renter offer to pay two months up front, and another who came to look at the house ready to make an offer with a package of documents that included a copy of a completed rental application, a letter from his employer, additional letters of recommendation and a credit report.

"I've had offers over email without seeing it," said Ms. Schneider, adding that she hasn't experienced anything like it since she began renting the house five years ago.

Inquiries came from as far away as Spain, Germany and Finland, and many from people in the high tech or medical fields. She ultimately rented it to a family. The clincher was that they agreed to sign a two-year lease.

While the nationwide housing market continues to struggle, Silicon Valley is one among a small number of areas where demand is strong. According to website Rent.com, the amount of rent that tenants are paying rose 11% in the first quarter in the San Jose market, which includes Palo Alto, Mountain View and Cupertino, compared with a 2.5% increase nationwide.

Ann Schneider had many offers to rent her Mountain View town home.

Realtors and real estate experts, meanwhile, are reporting a dearth of properties for sale, which often is a precursor to rising home values. Real estate statistics firm Altos Research of Mountain View found that, this spring, an average of about 76 homes were on the market in any given week in Palo Alto—the epicenter of the boom—compared with 110 a year earlier and about one-tenth the number in a similarly sized market near Dallas or Atlanta.

While in some cities, a lack of homes for sale could mean that owners are taking their properties off the market because they can't sell them, Altos Research Chief Executive Mike Simonsen said the very small number of homes listed with reduced prices suggested that this isn't the case in Silicon Valley. Properties with reduced prices comprised just 4% of current listings in Palo Alto, compared with a little more than 40% six months ago and 25% a year earlier.

Additionally, properties that were relisted, most likely because they couldn't be sold, also comprised just 4% of listings in Palo Alto, at the low end of the area's typical range of 4% to 15%. The median sale price in Palo Alto has largely remained unchanged in the past year at about $1.7 million, he said.

Real estate agents already see evidence of a housing crunch in a handful of communities such as Palo Alto, Menlo Park and Atherton, which are known for their schools and are near many of the fastest-growing companies. They say a number of two- and three-bedroom houses that are less than 2,000 square feet have sold for $1 million to $2 million after receiving multiple bids.

"There's just not enough land to build [in this area]," said Keri Nicholas, a real estate agent in Menlo Park, though she added that the market appears to be heating up over the last five months at a slower pace and more unevenly than during the Internet bubble when "it happened very quickly and ended very abruptly." She said there were still pockets in the broader Silicon Valley area where homes are difficult to sell, especially in the lower-end price range where buyers might have a harder time qualifying for loans.

Those who aren't interested in buying or can't find adequate houses for purchase are looking to rent. Mara McCain, an agent at Alain Pinel Realtors, recently listed a three-bedroom 2,850-square-foot house in Menlo Park on Craigslist for rent for $9,500 a month. Despite the high price, she said she has received more than 20 inquiries. She ended up renting the house to a technology executive.

At the heart of the boom is the technology industry, led by heavyweights such as Apple Inc. and Google Inc., which has fueled jobs and created wealth in the area.

An additional factor has been the anticipation of public offerings from companies such as Facebook Inc., valued by some investors at more than $70 billion and expected to go public as early as next year. Already, employees and others who have received private shares can sell them through specialized markets.

"All of a sudden, there are a ton of millionaires coming out because of Facebook," said Katie Hammer Riggs, an agent at Coldwell Banker Menlo Park.

Already, the initial public offering of another tech company, LinkedIn Corp., a professional networking site based in Mountain View, is prompting some employees to upgrade their homes.

Sid Vismanathan is a 27-year-old co-founder of a business card reading app called CardMunch that was acquired by LinkedIn in January for an undisclosed amount. After the May IPO of LinkedIn, Mr. Vismanathan this month purchased a 1,500-square-foot, three-bedroom house in Mountain View for $700,000, upgrading from the $400 a month he paid for a two-bedroom rental apartment shared with two others.
"I felt like it was a good deal," he said, adding that he lucked out because the owners wanted to sell quickly. "It was on the higher side of my budget, but it was a single-family unit and nothing of that similar type of house has sold for less than $769,000 in the last year," he said.

Multiple, Multiple Offers!

Offers, Offers, and more Offers...

1. 97 Stevenson, Atherton listed $5,999,000 had 3 offers

2. 506 Edgecliff Way, Redwood City listed $899,000 had 14 offers

3. 717 Oregon, Palo Alto listed $998,000 had 3 offers

4. 740 Layne Ct, Palo Alto listed $888,000 had 7 offers

5. 191 Lyndhurst, San Carlos listed $1,298,000 had 3 offers

6. 323 Santa Rita, Palo Alto listed $3,875,000 had 2 offers