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

If you would like to see these, or any other homes in Menlo Park, Atherton or Palo Alto, please give me a call at (650) 888-6628 or visit my website at www.barbaraslaton.com .


I specialize in Buying and Selling fine properties here in the heart of the Mid-Peninsula.

Homeowners Emerge From Denial on Falling Values

(02-10) 18:57 PST -- Perception is finally catching up to reality when it comes to home prices.

A quarterly survey by Zillow.com and Harris Interactive of how people view the value of their homes shows that more people now realize that their single largest asset is declining in value.

More than half (57 percent) of 1,573 homeowners surveyed now believe that their home lost value in 2008. That still lags the reality that 76 percent of all U.S. homes declined in value in 2008, according to Zillow's figures.

A full quarter of homeowners had the sunny view that their home's value had increased; in reality, 20 percent of homes did increase in value during the year, according to Zillow's reckoning. Another 18 percent insisted their homes' value was the same, while only 4 percent of homes actually kept their value, Zillow said.

Previous surveys showed homeowners mired deeper in denial, convinced that their own homes were immune to the nationwide plunge in real estate values that started about 2 1/2 years ago. Just six months ago, only 38 percent of people surveyed believed that their homes were declining in value.

That's despite constant bad news with headlines, TV news reports and respected indexes such as Case-Shiller trumpeting the onslaught of foreclosures that caused home prices to fall faster than a rock dropped from the top of a tower.

"Up until now, people have been pretty resistant to external data about the housing market and have continued to say their homes are doing quite fine," said Stan Humphries, vice president of data and analytics for Zillow in Seattle. "The events of fall 2008 with bank failures and large companies going out of business marked a turning point in many people's heads about what's actually happening. The fact that the economy is having larger troubles makes them more aware of what's happening to home values."

Still, people remain optimists when it comes to real estate's future prospects. More than two-thirds (70 percent) of homeowners believe their home's value will either rise or stay the same during the next six months. That's far more cheerful than any economic forecast, even that of the perpetually upbeat National Association of Realtors.

"We're optimists by nature," said Daniel McGinn, author of the 2008 book "House Lust: America's Obsession with Our Homes." "It's a lot easier to ignore the decline in value of your house than of your stocks, bonds and 401(k). There is only so long you can ignore opening your 401(k) statements."

Of course, unlike 401(k)s, homes don't come with handy guides to check their value. That's where services like Zillow, which was founded in 2005, try to step in. By offering value estimates for millions of homes, it became a social phenomenon, tapping into people's voyeuristic curiosity and real estate mania.

"One thing that makes homes such fascinating elements in our lives is their illiquidity," McGinn said. "You can't wake up tomorrow and look in the newspaper to figure out what your house is worth. It takes work - hiring an appraiser, doing competitive analysis, talking to Realtors. At the end of the day, you never really know what your house is worth until you sell it."

Homeowners in the hard-hit Western states are the most pessimistic nationwide. The survey showed 70 percent of homeowners there believe their homes are worth less - although the actual percentage of homes that decreased there clocked in at 90 percent.

Less denial

A nationwide survey of homeowners found that more than half now know their homes lost value over the past year when 76 percent actually did.

Perception:

-- Home is worth less: 57%

-- Home is worth the same: 18%

-- Home is worth more: 25%

Reality:

-- Homes worth less: 76%

-- Homes worth the same: 4%

-- Homes worth more: 20%

Source: Zillow.com