The “Facebook” Effect – Is It Real?

The recent upturn in Bay Area real estate activity has frequently been linked to something that’s been coined as the Facebook Effect. In anticipation of the public offering of Facebook stock (and continuing after its recent bumpy roll out) many have been talking about the tech millionaires and how they will be buying up all available real estate at exorbitantly high prices. Not so fast!

Here’s the bad news – stock options (or “Restricted Stock Units”, which is what the majority of Facebook employees and executives really have) don’t just turn into gold over night. There are vesting periods, a one-year holding period to push related taxes into the category of Capital Gains and, while we’re talking about taxes, there are taxes to pay. The translation is that turning employee stock holdings into cash is typically far from instantaneous.

The good news, however, is that tech company employees do eventually get access to their stock, and property values will be positively influenced by them into the foreseeable future!

The reality of our current hot real estate market has much more to do with the lack of housing inventory, the high costs of rent and the rapidly improving local employment numbers than the IPO of one tech firm. The Facebook Effect would more accurately be described as the emergence of the new economy, including the abundance of modern companies participating in everything from cancer research to communication to on-line gaming.

Now, if you happen to have a house that would interest Mark Zuckerberg, all of his 120 million shares of stock have fully vested and he can probably close in a couple of days!