Silicon Valley property market ‘likes’ Facebook IPO as local real estate prices rise

House prices and home sales in Silicon Valley, the technology hub south of San Francisco, increased strongly in the months leading up to the floating of Facebook shares on the Nasdaq index. 

In the city of Palo Alto, where Facebook has its headquarters, the median price of single-family house has risen 9% in the past year to $1.28 million, according to the Zillow Home Values Index – the biggest jump since 2008.

This median price equates to about 34,000 Facebook shares at the current price of $38 per share.

According to Zillow, 85% of homes in Palo Alto increased in value in March, while only 11% decreased in value.

Earlier this year, before the listing of Facebook shares, founder Mark Zuckerberg paid about $7 million for 465-square-metre, seven-bedroom house in an affluent neighbourhood of Palo Alto. 

The prospective listing of professional networking site LinkedIn has also helped drive up property prices around its Mountain View headquarters, just south of Palo Alto.

LinkedIn’s plans to list on the New York Stock Exchange (NYSE) were announced in January, with house prices in Mountain View up 5.1% year-on-year to a median of $741,000.

Mountain View is also the headquarters of Google.

Figures compiled by US real estate listings website Sawbuck show that two months prior to the listing of Facebook, there were 1,531 home sales, compared with just 840 in the two months before Facebook announced its plans to go public.

The surge in prices in Silicon Valley is in sharp contrast to the overall performance in the US housing market.

According to the benchmark S&P/Case-Shiller index of property values, house prices fell 3.6% percent in March year-on-year to their lowest level since 2003.

US house prices are down 33% from their peak in 2006.

According to Kenneth Rosen, chairman of Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, the boom in Silicon Valley house prices could continue into 2013.

“It’s just the beginning of the story, and I suspect we’ll see an explosion in the next couple years,” Rosen told Bloomberg.

“You’ve got young people with real money, and it’s not surprising they want to have a house,” he added.

According to Bloomberg, around 300 companies filed IPOs last year with 10% of those in California.

Venture capitalists invested almost $23.3 billion in Silicon Valley start-ups last year, according to estimates from the National Venture Capital Association show.