The Facebook Effect - How the IPO impacts Palo Alto and Los Altos

By
Real Estate Broker/Owner with Catarra Real Estate, Inc CA BRE #01191946

With the impending Facebook IPO, there has been a lot of gossip about what impact it will have on local real estate.  I've written about this before but as time moves on, the markets continue to evolve.  Two of the hottest nearby markets are Palo Alto and Los Altos.  Will people with wealth from the Facebook IPO drive sales and prices higher?

Yes and no.  The Facebook Effect is already starting to be seen in these markets (as well as Menlo Park and others).  The anticipation of higher prices is driving prices up as other buyers snap up homes which prices are within their reach.  This is driving sales (number of homes sold) a bit higher as well.

What is The Facebook Effect?

  • Sellers on the market expect multiple offers and higher prices
  • Some sellers are holding off selling hoping for a future windfall
  • Prices in Palo Alto and Los Altos are up sharply so far this year, before the Facebook IPO happens
  • Buyers are moving quickly on nearly anything on the market in many local towns
  • Some buyers are "settling" now instead of waiting in the belief prices will rise
  • General market euphoria feels like the boom markets of 2000 and 2005

Is The Facebook Effect Good For Real Estate?

Absolutely but it has changed the dynamics of how homes are sold.  One effect I've seen is a rise in off-market sales.  Sellers are willing to sell off the MLS to any buyer who will pay a price close to the open market.  This gives buyers who don't have Facebook money a chance to buy without having to compete with cash-rich buyers.

The other factor is that average and median sales prices are rising at a steady pace with Palo Alto leading the way.  As prices return to their dot-com peaks, the euphoria is likely to abate a little as buyers settle down.  Sellers will still be in control for a long time and hopefully this market sustains itself.

Lastly, new construction is plentiful which is great for local builders who were hit hard by the economic downturn.  There are a lot of speculative builders coming back into the market which should continue well into 2013.

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  1. Derrick McQuade 05/10/2012 04:19 PM
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Topic:
Real Estate General Information
Location:
California Santa Clara County Palo Alto
Groups:
San Francisco Bay Area Real Estate
Market Reports
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Tags:
market update
los altos real estate
palo alto real estate
facebook effect

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Rainer
25,804
Kevin Sembrat
Diversified RCS Inc; http://www.ManhattanPropertiesGroup.com

Hi Bryan,

Insightful points here! Thanks for posting!

Kevin

May 10, 2012 07:48 PM
Ambassador
625,591
Doug Rogers
Your Pineville Louisiana Agent
Bayou Properties Realty

Should make for an interesting year!

May 10, 2012 08:17 PM
Rainmaker
1,153,540
Cheryl Ritchie
Southern Maryland 301-980-7566
RE/MAX Leading Edge www.GoldenResults.com
Rise in off market sales...please explain that lingo....sell off the MLS...do you mean FSBO's? The terminology is throwing me early this AM.
May 11, 2012 02:12 AM
Rainer
97,779
Jeffrey Funk
Orlando Real Estate
Realty Executives Central Florida

Bryan, It is nice to hear Facebook is having a positive effect on your area! Interesting post, thanks for sharing!

May 11, 2012 03:29 AM
Rainer
20,372
Eric Estate
JB Goodwin

Palo Alto and Menlo Park have been pricey since the early 90's.  I remember a time when it was all orchards and you could get acerage for $20K.

May 11, 2012 04:01 AM
Rainmaker
1,844,556
Gita Bantwal
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
RE/MAX Centre Realtors

Good post. I do not have a facebook business page . I will think about it.

May 11, 2012 05:09 AM
Ambassador
924,534
Amanda and Jared Christiansen, YOUR Fort Wayne Realtors
Century 21 Bradley.
Century 21 Bradley (260)704-0843

Very interesting stuff Bryan.  I need to read a little more about it.                                                                                    

May 11, 2012 05:17 AM
Rainmaker
891,596
Michael Setunsky
Your Commercial Real Estate Link to Northern VA
Michael's Commercial LLC

Bryan, I can see where this would have an impact in your area. Good for you and happy selling.

May 11, 2012 05:50 AM
Rainmaker
145,370
Richard and Jean Murphy
(207) 712-4796
Harborview Properties

Pretty sure Facebook is moving their entire operation to Portland, Maine!!

May 11, 2012 05:53 AM
Rainmaker
1,048,730
Scott Godzyk
One of Manchester NH's Leading Agents
Godzyk Real Estate Services

Good Morning Bryan, It is definately positive wihen a market is infused with buyers. The one thing i notice is all markets react to supply and demand. I hope it allows your area to prosper. have a great Friday

May 11, 2012 05:54 AM
Rainmaker
248,226
Rob Spinosa
Marin Mortgage Broker
RPM Mortgage, Marin County, CA

In all of the talk of the Facebook IPO, I haven't yet seen the actual numbers of people this might affect.  When looking at it statistically, I'd be curious to know the base population of those who will be in on the IPO and then likely turn and invest that in the housing market.

May 11, 2012 06:03 AM
Rainmaker
572,328
Phil Leng
Phil Leng Team - Residential Real Estate Experts &
Keller Williams Eastside Market Center

Hi Bryan,

Who would have guessed that the ipo of a company would affect the entire area?

Hold on - I live on the east side of Seattle. We still feel the Microsoft effect these 30 years later!

Phil

May 11, 2012 06:14 AM
Rainmaker
570,044
Bill Gillhespy
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos
16 Sunview Blvd

The combination of the FB effect driven by positive consumer news and dwindling inventory - deja vu all over again !

May 11, 2012 07:38 AM
Rainmaker
1,368,882
Donna Harris
Realtor, CDPE & ASP - Hill Country Lakeway Austin
Regent Property Group

It sounds like a great market to be in for those sellers able to recoup their value.

May 11, 2012 07:40 AM
Rainmaker
313,510
Sandy Acevedo
RE/MAX Masters, Inland Empire Homes for Sale
951-290-8588

Hi Bryan, to be at the whim of not only the general economy but also because of a stock sale is crazy. Of course, it is not any ole company, only Facebook. I heard that the state of California is already counting its chicks from that sale as well.

May 11, 2012 09:00 AM
Rainmaker
501,705
Christine Smith
Exclusive Buyer Agent & Attorney, Canton, MA
Buyers Brokers Only LLC - www.BuyersBrokersOnly.com

Bryan....excellent post about the Facebook effect on your local market.  Hopefully it also spreads beyond your market & things continue on the upward swing.

May 11, 2012 09:31 AM
Rainmaker
1,043,698
Robert (Bob) Gilbert
Your Katy TX Real Estate Expert
Berkshire Hathaway HomeServices Anderson Properties

Bryan,

Anytime you have folks with a unexpected windfall of cash it should be good for the local area real estate market. This situation my friend should be very good for you personally and since you are truly a really good agent this year and next should be tremendous years for your own personal P & L.

May 11, 2012 09:44 AM
Ambassador
1,082,788
Bryan Robertson
Broker, Author, Speaker
Catarra Real Estate, Inc

Thanks for all the great comments everyone!  The estimated number of new buyers is 1000 but they're focused in markets that only get a few hundred listings per year.

The phrase "off market" or "off MLS" refers to sales made without going on the MLS.  Such listings are also called "pocket listings".  More of these deals are happening with cash buyers.

May 11, 2012 09:55 AM
Rainmaker
338,151
Lloyd Binen
Silicon Valley R since 1976;408-565-8177
Certified Realty Services

Bryan,

We're lucky to be here. 

Many of the heavy-hitters at FaceBook have already purchased out of fear the IPO would cause a price spike.  From what I can tell SF is hotter than SV.  Many start-up internet companies are pulled to SF.

For the record...my opinion: this "off MLS" is B.S. & probably a violation of Agency.  Agents talking out of both sides of their mouths.  Just my opinion.

May 14, 2012 11:55 AM
Rainmaker
331,738
John Juarez
CDPE, ePRO, SRES, GRI, PMN
Prudential California Realty

Silicon Valley is awash with money and has been throughout this recession. Many potential buyers sat on their wallets and watched a declining market. Now those buyers have made a decision – along with many others in the San Francisco Bay Area that it is time to buy. An improving economy and a suspicion that the real estate market has hit bottom have been the stimuli.

The amazing amount of new cash created by Facebook going public will only add to the already strong demand for houses in the San Francisco South Bay.

May 14, 2012 12:54 PM
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Bryan Robertson

Broker, Author, Speaker
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