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

Comments 30 New Comment

Rainmaker
490,141
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
978,682
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
1,069,787
Bryan Robertson
Innovator, Writer, 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
335,335
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
319,135
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

Innovator, Writer, Speaker
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Additional Information

Read about news, reviews, and commentary about current events and trends in the real estate industry. I also write about local markets including Silicon Valley and my hometowns - Los Altos and Saratoga.