Menlo Park Real Estate Prices Jump

As reported in Bloomberg Businessweek, prices in Menlo Park are rising as inventory remains small.  The rest of the nation is tuning in on what is happening in our bubble of the world.

Here is an excerpt from the article which as published today.  Facebook Inc. (FB) (FB)’s Silicon Valley (MXWO0IT) hometown has a limited supply of real estate available for its newly minted millionaires as sellers await further price gains in a market buoyed by growing wealth from technology businesses.

Home listings in Menlo Park, California, a leafy town about 30 miles (48 kilometers) south of San Francisco, fell 9 percent in the year through April compared with the same time in 2011, data from MLS Listings Inc. show. The number of new properties coming to the market decreased for the eighth time in 12 months.

The initial public offering of the world’s biggest social network, which raised $16 billion on May 17, is contributing to surging real estate demand in Silicon Valley’s tech enclaves and bolstering values amid scarce inventory. The median price of a home sold in Menlo Park jumped 8.5 percent to $1.19 million in the first quarter, according to research firm DataQuick.

“The market was already hot, and now there’s more pent-up demand,” said Jim Harrison, chief executive officer of MLS Listings, a Sunnyvale, California-based publisher of home listings for San Mateo and Santa Clara counties in the heart of the Valley. “Buyers are going nuts, but sellers are holding back.”

Facebook, which has fallen (FB) 22 percent since its IPO, is only one factor fueling wealth creation, said Michael Dreyfus, founder of Dreyfus Properties, a brokerage with offices in Menlo Park and the neighboring city of Palo Alto. Hiring at Apple Inc. and Google Inc., as well as law and finance firms, has yielded a “very broad-based and healthy” surge in real estate, he said on Bloomberg Television’s ’’Bottom Line’’ on May 23.

‘Savvy’ Sellers
A “savvy bunch of sellers” has purposely kept their homes off the market in desirable areas in anticipation of the IPO, Dreyfus said. Listings haven’t been this scarce at this time of year since 2005, when house prices neared peak values, said Theresa Dreike, an MLS Listings spokeswoman.

“With so many people looking and so few homes available, the market is squeezed and sellers can get whatever they want,” said Stephanie Seeger, 39. She and her husband bid $86,000 over the asking price to win a four-bedroom home with about 2,300 square feet (214 square meters) in Menlo Park’s Willows neighborhood. The $1.88 million purchase is scheduled to close today, she said.

Across the U.S., a scarcity of homes for sale is boosting property values, from foreclosure-stricken Florida and Arizona to more robust markets in Texas and coastal California. Home listings totaled 2.54 million in April, the lowest for the month since 2005, according to National Association of Realtors.

Waiting It Out
In hard-hit areas, people who owe more than their homes are worth, known as negative equity, are crimping supply by refusing to unload their property at a loss, said Stan Humphries, chief economist of Seattle-based real estate service Zillow Inc. Sellers in Silicon Valley, on the other hand, are motivated by maximizing price and can afford to wait as job growth and the economy improve, he said.

Home values in the U.S. should be “modestly stronger” by the end of the year, rising about 3 percent, Barclays Plc analysts in New York said in a May 23 note. All nine regions in a Federal Housing Finance Agency housing index showed price gains in March. The gauge climbed 2.7 percent from a year earlier, the biggest increase since November 2006.

“You’ve got a lot of people with negative equity who want to sell but can’t, and people in affluent areas choosing not to sell,” Humphries said in an interview. “A pattern of materially stronger demand is emerging, but there’s a big constraint on supply.”

Cupertino, Palo Alto
In Cupertino, home to Apple (AAPL) (AAPL), inventory this year through April fell 15 percent, and new listings dropped for the 10th time in 12 months, MLS Listings said. Prices climbed 2 percent in the first quarter from a year earlier to $1.1 million, according to San Diego-based DataQuick. In Facebook’s former home of Palo Alto, adjacent to Stanford University, new listings declined for the 11th month, and prices jumped 22 percent to $1.6 million.

Facebook announced in February 2011 that it would move to an empty Menlo Park office campus in a lease deal that was the area’s largest in 20 years. The 1 million-square-foot complex, dubbed 10 Hacker Way, was followed by a $250 million renovation that’s still under way. About 2,400 employees work there.

This article shows that luxury real estate is alive and well in the area.  Even thought the Facebook IPO has not gone as expected, many Facebookers cashed out some of their shares before the IPO and still made their money, while another group has to wait 6 months to sell, and hopefully the price will have rebounded by then.