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...and it tanks again. Many facebook employees purchased houses using facebook stock. That is, they didn't have enough income to qualify for a loan, but they sh

by fkdjs 14y ago

...and it tanks again. Many facebook employees purchased houses using facebook stock. That is, they didn't have enough income to qualify for a loan, but they showed their facebook stock + current market price(pre-ipo), and got approved that way. So one bubble(FB), inflated another bubble(housing), and it's all deflating before our eyes. The fact that facebook employees are tanking/will tank this stock further should tell you something. I believe the employees start selling en masse in October, so this is just the warmup. I'm betting we'll see $12.

localhost3000 14y ago
never considered that. is this true? were banks giving mortgages using stock as collateral / proof of credit-worthiness? how widespread is this?
- tatsuke95 14y ago
  Sounds bit of an odd practice to me, since a mortgage is such a straight-forward, easy-to-get loan that the Mexican landscaper can get one even though he doesn't live in the country. But I believe it. Shares in a company are real assets, and this is the Valley. Interesting story.
  - melvinmt 14y ago
    Mexican landscapers can't buy multi-million dollar homes (assuming that's the range we're talking about here). Other than that, can't really feel sorry for hurt millionaires, it sucks for them, but there are more pressing problems in the world to worry about.
- retube 14y ago
  actually pretty common for high net worth individuals. If you earn 300k a year but have stock worth $10m then yeah banks will lend you way, way above what your income alone would support (ot at least they did prior to the credit crisis. One of the lehman bosses had loans of nearly 50m collaterised with his stock... which went to zero)
RobAtticus 14y ago
Considering the housing bubble peaked 5 years ago, way before FB was valued at $100B, and has been deflating ever since, I find your connection tenuous, at best.
- samstave 14y ago
  Well, it appears to be an individual's housing bubble in the personal cases if the FBs that did buy their houses that way. It's a hard lesson. I have been burned on the promise of options too many times to believe that they will ever turn out like goog did. Sucks for the employees of FB, but I am happy that we are seeing sanity in the valuation and it is not insanely over inflated via hype.
- harlanlewis 14y ago
  "Across the country, home values fell 15% to 60%, peak to bottom, depending on the area and how badly it was affected by foreclosures — most of San Francisco got off comparatively lightly with declines in the 15% to 25% range." In SF, the bubble was effectively flattened. Other areas saw loss of value beyond pre-bubble prices. Quote from one of many available sources, this one comes with graphs: http://www.maureenterris.com/?p=2557 http://www.maureenterris.com/?p=2557 SF/Silicon Valley was insulated against the rest of the country's housing crisis largely due to its strong tech sector, which didn't suffer the recession as severely. I don't know about people using pre-IPO stock to get loans, but the connection is less tenuous than you might expect.
- fkdjs 14y ago
  And the bubble deflation barely touched the silicon valley, thanks to employees in the valley engaged in bidding wars on homes. Yes it deflated a little, but that's peanuts compared to other parts of California where people literally lost their entire net worth. Combine Facebook employees, Apple employees and investors from China and you have another bubble.
- smsm42 14y ago
  It peaked 5 years ago, this is true, but check out the house values in some neighbourhoods of Palo Alto, Menlo Park, etc. Here's a random 3br house in Menlo Park: http://www.zillow.com/homedetails/1328-Orange-Ave-Menlo-Park-CA-94025/15594333_zpid/ http://www.zillow.com/homedetails/1328-Orange-Ave-Menlo-Park... You don't see huge deflating going on, right? Prices have fallen a lot in some places in the Silicon Valley (like San Jose), but remained quite high in others, primarily on the expensive (1M+) end of the market.
ajays 14y ago
I'm curious, and would love to hear FBers comments on this: how many shares do employees typically have? At what price point (or were they RSUs)? What's the vesting period?

by fkdjs 14y ago

localhost3000 14y ago

never considered that. is this true? were banks giving mortgages using stock as collateral / proof of credit-worthiness? how widespread is this?

tatsuke95 14y ago
Sounds bit of an odd practice to me, since a mortgage is such a straight-forward, easy-to-get loan that the Mexican landscaper can get one even though he doesn't live in the country. But I believe it. Shares in a company are real assets, and this is the Valley. Interesting story.
- melvinmt 14y ago
  Mexican landscapers can't buy multi-million dollar homes (assuming that's the range we're talking about here). Other than that, can't really feel sorry for hurt millionaires, it sucks for them, but there are more pressing problems in the world to worry about.
retube 14y ago
actually pretty common for high net worth individuals. If you earn 300k a year but have stock worth $10m then yeah banks will lend you way, way above what your income alone would support (ot at least they did prior to the credit crisis. One of the lehman bosses had loans of nearly 50m collaterised with his stock... which went to zero)

RobAtticus 14y ago

Considering the housing bubble peaked 5 years ago, way before FB was valued at $100B, and has been deflating ever since, I find your connection tenuous, at best.

samstave 14y ago
Well, it appears to be an individual's housing bubble in the personal cases if the FBs that did buy their houses that way. It's a hard lesson. I have been burned on the promise of options too many times to believe that they will ever turn out like goog did. Sucks for the employees of FB, but I am happy that we are seeing sanity in the valuation and it is not insanely over inflated via hype.
harlanlewis 14y ago
"Across the country, home values fell 15% to 60%, peak to bottom, depending on the area and how badly it was affected by foreclosures — most of San Francisco got off comparatively lightly with declines in the 15% to 25% range." In SF, the bubble was effectively flattened. Other areas saw loss of value beyond pre-bubble prices. Quote from one of many available sources, this one comes with graphs: http://www.maureenterris.com/?p=2557 http://www.maureenterris.com/?p=2557 SF/Silicon Valley was insulated against the rest of the country's housing crisis largely due to its strong tech sector, which didn't suffer the recession as severely. I don't know about people using pre-IPO stock to get loans, but the connection is less tenuous than you might expect.
fkdjs 14y ago
And the bubble deflation barely touched the silicon valley, thanks to employees in the valley engaged in bidding wars on homes. Yes it deflated a little, but that's peanuts compared to other parts of California where people literally lost their entire net worth. Combine Facebook employees, Apple employees and investors from China and you have another bubble.
smsm42 14y ago
It peaked 5 years ago, this is true, but check out the house values in some neighbourhoods of Palo Alto, Menlo Park, etc. Here's a random 3br house in Menlo Park: http://www.zillow.com/homedetails/1328-Orange-Ave-Menlo-Park-CA-94025/15594333_zpid/ http://www.zillow.com/homedetails/1328-Orange-Ave-Menlo-Park... You don't see huge deflating going on, right? Prices have fallen a lot in some places in the Silicon Valley (like San Jose), but remained quite high in others, primarily on the expensive (1M+) end of the market.

ajays 14y ago

I'm curious, and would love to hear FBers comments on this: how many shares do employees typically have? At what price point (or were they RSUs)? What's the vesting period?