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.