Google the term “The Facebook Factor” and you will find a large collection of books and articles on the subject. They talk about the influence of social networking on everything from our love lives to Egypt's revolution. For us in Silicon Valley, Facebook is a brick-and-mortar company located right next door in Menlo Park. When I drive from Palo Alto to see my parents in Fremont, I make a left turn onto Dumbarton Bridge East at Hacker Way, the vanity address of Facebook’s new headquarters.
But what’s with all the real-estate related Facebook news?
It is no secret: we are currently experiencing a shortage of homes available for sale here on the Peninsula. Market activity is limited only by the available supply of homes. During the first three months of the last year, 164 homes were listed and 79 were sold in Palo Alto. This year, only 126 homes were put on the market while the same 79 were sold. With fewer homes coming to the market and sales remaining strong, Palo Alto single family home inventory dropped to only 30 units in March. Compare this number with 60 homes at the same time last year.
Word on the street is that many sellers are holding listings back for now, waiting for Facebook to go public. It is expected that the Facebook IPO will produce 500 to 1,000 new millionaires. Some sellers are expecting that these newly-minted millionaires will drive up prices in the local markets, including Palo Alto, Menlo Park, Mountain View and Los Altos. One Silicon Valley executive in Los Gatos is going as far as offering his 11.5-acre estate in exchange for pre-IPO Facebook shares (see the story at MercuryNews.com).
Buyers, on the flipside, are talking about beating the Facebook crowd and getting into available homes before being priced out of the area.
Meanwhile, home prices are already pushing up toward record highs. In March 2012, the median price of a single family home in Palo Alto reached $1,633,000, a 64 percent increase from the last market bottom in March of 2009. Multiple offers are expected for well-priced properties and off-market pocket listings are becoming a common occurrence.
If I would have to advise a client, I would recommend not to time the sale or purchase of a home to any company's IPO, but rather to focus on market fundamentals. The Silicon Valley economy is doing much better than the state and the country overall, with the unemployment rate for Palo Alto residents at 4.7 percent in February. Near-record low interest rates are further supporting the local recovery. Sellers today have the chance to get top dollar for their Palo Alto properties while buyers are able to get into a highly desirable area and lock in their housing costs for the foreseeable future.
Michael Talis is co-owner of Talis Real Estate