The impending, and now delayed, Facebook initial public offering may have investors the world over biting their nails with impatience. But the feeling might be most palpable these days in Facebook’s own backyard, as Silicon Valley real estate continues to heat up in anticipation.
Home prices in Palo Alto, Calif., where Facebook CEO Mark Zuckerberg lives and where the social network company is headquartered, have already spiked 20 percent this calendar year, according to data from residential real estate group Dreyfus Properties.
The town’s balmy weather and competitive schools are a draw, but what makes the area so frighteningly expensive is its proximity to the biggest tech players on the planet.
Hewlett-Packard was formed in a Palo Alto garage. Apple, Google, LinkedIn, Twitter, Intel, eBay and Adobe, among many others, are all headquartered in close proximity.
Of the more than 12,000 homes in Palo Alto, only 47 are on the market, “because people don’t want to sell. They live there until they die, and then they pass it along to their children,” said Ken DeLeon, the top real estate agent covering Silicon Valley at Keller Williams Realty, and one of the top five brokers in the nation based on sales. The average price for a home in Palo Alto in the second quarter was $1.8 million.
“But the few people who are looking to sell are no stranger to what IPOs can do to pricing,” he said. Brokers said their clients were hesitant to talk about wanting to sell their homes, for privacy reasons.
After Google went public in 2004, home prices in northern Palo Alto and in a ritzy neighboring town, Atherton, shot up about 18 percent for the year, according to statistics provided by Keller Williams. Between 2003 and 2007, average home prices rose by as much 40 percent in those two cities, according to research by Dreyfus Properties.
Brokers say homeowners in the Palo Alto area today are holding off on listing their properties until Facebook goes public. Recent reports suggest Facebook has pushed back plans for an IPO until fall of 2012 or later. Nevertheless, buyers are scrambling to get their hands on a new house before contending with what they fear will be a group of bottomless-pocketed Facebook employees on the prowl.
In effect, efforts to pre-empt the IPO real estate market have pushed prices up already. “A lot of the buyers feel they need to get in before [the IPO] happens, and a lot of the sellers felt they needed to wait. That was driving the market for the past year,” said Michael Dreyfus, a leading Silicon Valley real estate agent and owner of Dreyfus Properties.
Facebook currently has 2,000 employees, and the Menlo Park campus that will soon be its home allegedly has capacity for 9,000. Menlo Park is about 10 minutes from Palo Alto. In May, Zuckerberg shelled out $7 million for a five-bedroom house in Palo Alto.
“Those 2,000 people, most millionaires, some billionaires, are going to be looking for a place to live,” said DeLeon, “and the supply in the area is so low that it doesn’t take much change in demand to spike up home prices.”
In the meantime, while some employees wait to buy, rents have skyrocketed. “The market for rentals is smoking hot right now,” said Ann Arjani, broker and owner of the Arjani Group. She claimed rental prices rose 45 percent in the first half of this year.
A few factors may differentiate Facebook’s IPO from those of previous years. For one, there is the active secondary market for Facebook stock that has recently developed. Brokers point to several Facebook clients who sold a portion of their stock on the private market to buy homes and beat the rush, which would even out the buying spree.
DeLeon, who sold homes during the Google IPO period, agreed that the Facebook IPO price pop might be smaller than some expect, but said owners are right to predict rising prices on the whole, especially given that Facebook’s valuation, by some estimates, is about $100 billion, higher than Google’s value pre-IPO.
“Even though the secondary market for Facebookers is active, I think the impact of Facebook’s IPO will be as big or bigger than Google’s. As intense as prices are now, they’re going to get higher, and that is what Google showed,” DeLeon said.
A second difference, said Dreyfus, is that “this time people are interested in biking and walking to things more than ever, including work,” and so that the more green-minded millennials working for Facebook might put increased price pressure on Palo Alto and Menlo Park, within walking distance of the company’s headquarters.
In addition, the weakened dollar has drawn more foreign investment into the area, including a recent $100 million purchase of a house in nearby Los Altos Hills by a Russian buyer, reportedly the highest price ever paid for a single-family home in the U.S. Some homeowners are also expecting a new wave of buyers as early as this November, when the restriction on selling shares expires for LinkedIn investors, DeLeon said. LinkedIn went public in May, with shares closing on the first day up by 109 percent.
“We’re about to see record all time-highs for home prices in Palo Alto and the surrounding area this year,” said DeLeon. When tech is hot, so is the real estate market here. And tech is very hot right now.”
Home prices in Palo Alto, Calif., where Facebook CEO Mark Zuckerberg lives and where the social network company is headquartered, have already spiked 20 percent this calendar year, according to data from residential real estate group Dreyfus Properties.
The town’s balmy weather and competitive schools are a draw, but what makes the area so frighteningly expensive is its proximity to the biggest tech players on the planet.
Hewlett-Packard was formed in a Palo Alto garage. Apple, Google, LinkedIn, Twitter, Intel, eBay and Adobe, among many others, are all headquartered in close proximity.
Of the more than 12,000 homes in Palo Alto, only 47 are on the market, “because people don’t want to sell. They live there until they die, and then they pass it along to their children,” said Ken DeLeon, the top real estate agent covering Silicon Valley at Keller Williams Realty, and one of the top five brokers in the nation based on sales. The average price for a home in Palo Alto in the second quarter was $1.8 million.
“But the few people who are looking to sell are no stranger to what IPOs can do to pricing,” he said. Brokers said their clients were hesitant to talk about wanting to sell their homes, for privacy reasons.
After Google went public in 2004, home prices in northern Palo Alto and in a ritzy neighboring town, Atherton, shot up about 18 percent for the year, according to statistics provided by Keller Williams. Between 2003 and 2007, average home prices rose by as much 40 percent in those two cities, according to research by Dreyfus Properties.
Brokers say homeowners in the Palo Alto area today are holding off on listing their properties until Facebook goes public. Recent reports suggest Facebook has pushed back plans for an IPO until fall of 2012 or later. Nevertheless, buyers are scrambling to get their hands on a new house before contending with what they fear will be a group of bottomless-pocketed Facebook employees on the prowl.
In effect, efforts to pre-empt the IPO real estate market have pushed prices up already. “A lot of the buyers feel they need to get in before [the IPO] happens, and a lot of the sellers felt they needed to wait. That was driving the market for the past year,” said Michael Dreyfus, a leading Silicon Valley real estate agent and owner of Dreyfus Properties.
Facebook currently has 2,000 employees, and the Menlo Park campus that will soon be its home allegedly has capacity for 9,000. Menlo Park is about 10 minutes from Palo Alto. In May, Zuckerberg shelled out $7 million for a five-bedroom house in Palo Alto.
“Those 2,000 people, most millionaires, some billionaires, are going to be looking for a place to live,” said DeLeon, “and the supply in the area is so low that it doesn’t take much change in demand to spike up home prices.”
In the meantime, while some employees wait to buy, rents have skyrocketed. “The market for rentals is smoking hot right now,” said Ann Arjani, broker and owner of the Arjani Group. She claimed rental prices rose 45 percent in the first half of this year.
A few factors may differentiate Facebook’s IPO from those of previous years. For one, there is the active secondary market for Facebook stock that has recently developed. Brokers point to several Facebook clients who sold a portion of their stock on the private market to buy homes and beat the rush, which would even out the buying spree.
DeLeon, who sold homes during the Google IPO period, agreed that the Facebook IPO price pop might be smaller than some expect, but said owners are right to predict rising prices on the whole, especially given that Facebook’s valuation, by some estimates, is about $100 billion, higher than Google’s value pre-IPO.
“Even though the secondary market for Facebookers is active, I think the impact of Facebook’s IPO will be as big or bigger than Google’s. As intense as prices are now, they’re going to get higher, and that is what Google showed,” DeLeon said.
A second difference, said Dreyfus, is that “this time people are interested in biking and walking to things more than ever, including work,” and so that the more green-minded millennials working for Facebook might put increased price pressure on Palo Alto and Menlo Park, within walking distance of the company’s headquarters.
In addition, the weakened dollar has drawn more foreign investment into the area, including a recent $100 million purchase of a house in nearby Los Altos Hills by a Russian buyer, reportedly the highest price ever paid for a single-family home in the U.S. Some homeowners are also expecting a new wave of buyers as early as this November, when the restriction on selling shares expires for LinkedIn investors, DeLeon said. LinkedIn went public in May, with shares closing on the first day up by 109 percent.
“We’re about to see record all time-highs for home prices in Palo Alto and the surrounding area this year,” said DeLeon. When tech is hot, so is the real estate market here. And tech is very hot right now.”
