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Low bonuses hurt NYC RE
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High end will hurt. 2-3 bedroom rentals and sales will rise as a result of the ultra high end buyers stepping down. The mid range 2 bedroom market never took a hit through out the recession and is positioned to remain strong in certain neighborhoods for the next few years. Just try to find a decent 2 bedroom that is not priced crazily high (and they are selling them!)

The table at the link shows NY as the only metropolitan area with a negative YOY. Any ideas why?

Most people familiar with how Wall St. works know that 2012 bonuses were not announced until Jan 2013. How does an article using Nov 2012 data reflect current sentiment? In fact, the bonuses people received a week ago were generally higher than they got 12 months ago. While the stock market is doing quite well so far this year. People working in Wall St. should be quite optimistic of their next bonus payout. Logical?

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When you refer to public banks, do you mean commercial banks? I have never heard anyone using the term public banks. Historically, no one working in commercial banks expected any sizable bonuses anyway. We should be taling about people in investment banks, investment bank divisions, hedge funds and so on. Some do better than others, like GS was doing so much better the Morgan Stanley. At GS, people get big increases in bonus that were paid in one shot and mostly cash. In the other end of the spectrum, Morgan Stanley gave out smaller bonuses over longer period of time. May be smaller percentage in cash also. How about others in the middle. Most did much better than the year before.

vic64: In this context, public banks presumably means publicly listed banks (therefore entities for which financial information is publicly available). If you're not familiar with this, I doubt you're in a strong position to vouch for the overall strength of bank bonuses this year. From anecdotal experience (this is the time of the year afterall that bank colleagues talk), they suck.

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1) this year seems generally better than last year, bonus-wise.
2) Case-Shiller tracks single-family homes, not apartments, so it being down in NY metro says nothing about Manhattan/Brooklyn co-op/condo prices.
3) Just came out of a gigantic (ten parties) bidding war on a mid-priced co-op. Somebody out there has money.

ali r.
DG Neary Realty

It is strange that seasoned streeteasy posters continue to confuse case Schiller index with manhattan coops and condo prices.

Also, think about the stock bankers got in the last couple of year at much lower prices which is vesting now.

December streeteasy condo index up 1 percent mom, more than 5% yoy - if you put 33% down, 15 % return last year. I get the argument about being able to make good money in equities, but what does that have to do with real esatate in manhattan being a bad investment. All risky assets except long dated bonds have gone up recently.

"Just came out of a gigantic (ten parties) bidding war on a mid-priced co-op"

What price range would you define as a "mid-priced co-op"?

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I work in a front office capacity at a large investment bank.

bonuses are mostly down, but even worse these new bonuses are stuffed with deferred cash or stock, and there are clawback provisions. all these things will reduce bankers willingness to spend, esp given job security remains low across the street as layoffs are now routine.

but i don't think businessinsider is a great source

ubs "layoffs are happening, yet again"
http://dealbreaker.com/2013/01/layoffs-watch-13-ubs/

ms "the deferred bonuses will be paid out over a three year period"
http://dealbreaker.com/2013/01/bonus-watch-13-morgan-stanley-is-going-to-take-its-time-on-this-one/

these are all recent

Tom, in a "down" year like this what does that mean for various ranks?

Obviously, partners / MDs are going to be down because the have to bear the brunt of the variability. But what about associates? Is "down" for them an actual drop, or just the lack of an annual bump? If not there, at what general point is "down" really down?

this year most who saw increases either 1) got a promotion / title change, which will come with a raise, 2) switched firms and got a guaranteed bonus, 3) or work on a good desk or group that happens to be doing well

bonuses have been good at the high end...the guys who make it rain get paid. but the vast army of analysts, associates, and vps have been hurting. a first year associate out of mba might make $100K base, and expect to get a bump up to $120K then $150K over the next two years. But these increases aren't happening for analysts, associates, or vps. And bonus levels are down with 25-40% of the bonus doled out over three years. You lose that money when you leave the firm.

i know one floor where 40% of associates got $0 bonus last year. vps also getting the shaft. these are the guys making $150-500k, they are getting killed.

banks lure talent with large guaranteed bonuses, leaving current employees dividing up a smaller pie.

my pay was up, go figure.

Thanks, Tom.

I think it is fair to say that with bonuses/tax changes everyone is making a bit less. Has to have at least a mild impact on the market. And; if the gov't wasn't keeping interest rates artificially low it would have a greater impact

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"vic64: In this context, public banks presumably means publicly listed banks (therefore entities for which financial information is publicly available). If you're not familiar with this, I doubt you're in a strong position to vouch for the overall strength of bank bonuses this year. From anecdotal experience (this is the time of the year afterall that bank colleagues talk), they suck."

How many people have dealed with or heard of any major financial institue that is not a publicly traded company? Are we talking about bonuses being handed out by those mom and pop local banks in Flushing or what? My point was, no one in Wall St. classify any of these major financial institues as public banks or not public banks. We don't call people receiving bonuses working for a public bank or not that way. We are talking only about people working in commercial banks, investment banks (front offices or back offices), investment bank divisions of a large bank or all sorts of funds. For me not calling public banks as losing my credentials? I think the reverse is true.

My points was meant to not just look at the few institutes that reported dimmer results. There are some bright spots too. Read the articles below:

Goldman Sachs Group Inc. (GS) will pay its employees an average of $399,506 for 2012, up 9% from a year ago as the securities firm's revenue climbed 19% and it reduced its headcount by 900 employees last year.

The firm, known for rewarding its bankers and traders with the highest payouts on Wall Street, set aside $12.9 billion for compensation and benefits for 2012, up 6% from $12.2 billion, a year earlier. Compensation expenses include salaries, bonuses and the vesting of previously granted stock awards. For 2011, Goldman employees earned an average of $367,057.

By comparison, employees at J.P. Morgan Chase & Co.'s (JPM) corporate and investment bank stand to take home average compensation of $216,928, down slightly from $217,600 for 2011.

The firm, which combined its investment bank with its corporate bank and treasury and securities services units in 2012, reduced its headcount for the business by 3% from a year ago to 52,151 employees. The company reported compensation expenses and staff in its fourth-quarter earnings report earlier Wednesday.

Meanwhile, Goldman accrued compensation for fewer employees than a year ago as the firm, along with its peers, have been trimming their workforces amid economic uncertainty, weak trading volumes and sluggish dealmaking activity. Goldman's total headcount as of Dec. 31, 2012, fell to 32,400, down 3% from a year ago, and declined by 200 employees from the prior period.

The securities firm paid out 37.9% of its revenue in compensation and benefits for 2012, down from 42.4%, a year earlier. A better-than-expected fourth quarter, along with cost-cutting, helped Goldman reduce the closely watched compensation ratio, which was tracking at 44% through the first nine months of 2012.

For J.P. Morgan, the ratio was 33% for the unit for 2012, down slightly from 34% a year earlier.

On a conference call with analysts, Goldman Sachs incoming Chief Financial Officer Harvey Schwartz said the firm's "lower compensation ratio in 2012 is, in part, a by-product of our efficiency efforts that began in early 2011."

Goldman Sachs, which launched a $1.4 billion cost-cutting program in 2011, said in July it would seek an additional $500 million in cost savings by the end of 2012 as it focuses on reining in expenses amid tough business conditions.

In a recent note to clients, Sanford C. Bernstein analyst Brad Hintz said Goldman investors would "see the effects of relocations and headcount reductions" in a lower compensation-to-revenue ratio for the firm during the period, adding that Goldman has "increased the proportion of its work force employed in 'high-value locations' from 10% to 22%" since 2007, while its headcount has come down.

The increase in average payouts for Goldman staff came a day after news surfaced that rival Morgan Stanley (MS) said it would forgo paying immediate cash bonuses for employees making more than $350,000.

Morgan Stanley will pay its bonuses in four equal installments, with the first chunk coming in May and the last in January 2016, according to people briefed on the firm's bonus deferral plan.

At Goldman Sachs, the firm typically pays out cash bonuses to employees in February, while stock-based compensation for staff vests over a three-year period.

On the call, Mr. Schwartz said Goldman has no plans to increase its bonus deferrals, adding a company has to be careful it's not "mortgaging the future" if it implements that policy. Pushing more such awards off to future years means they are accounted for in future expense disclosures and could leave a bank with less compensation flexibility to pay its staff.

There are many people out there who made millions before (or right after) the crisis, and still have tons of cash to buy property. The question is: how many? Enough to prop up the market, or not?

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300_mercer: regarding the gains in the SE index since 2009, it depends on your baseline. Once you account for negative carry, then if your benchmark is 3% return on capital, then your expectations may have been met. My baseline is higher. I'd want more than a 3% return on capital that is exposed to 15-20% volatility, especially so during a recovery period where so much govt support is given directly to the asset. Between ZIRP and $3 trillion of quantitative easing ($2 trillion of which was mortgage assets, about 20% of the total outstanding mortgage debt in the country), cost of financing has dropped by 40%. Economic recover, stocks and bonds through the roof. But nary a whisper from NYC RE.

Take the SE index January 2009-present and look at the annualized increase averaged across all possible purchase points, it's been 3%. Jumbo mortgage rates have averaged 5% (30-yr) or 4% (ARM), let's call it 4.5%. You take out a loan for 66%, that's 3%. Then take out another 3% for maintenance / taxes / upkeep / transaction costs. It's cost you 3% to stay in the home even after putting 33% down (but you don't pay rent).

Average annual increase for stocks on all entry points between Jan 2009-present has been 14%. On a 33% down payment, that amounts to 4.5% of purchase price. So the buyer has had to pay 3% annually, but got a roof over their head in return. The renter received 4.5% annually, but had to pay for rent.

For me, that 7.5% difference between -3% and +4.5% is equal to 2.5x my rent. Had I owned, my return on capital would have been 0% even after accounting for my rent. Relative to buying, I gained (each year) an amount that is 1.5x my rent even after paying my rent. If you know my rent, that is a lot of money.

Stated from the other side, I could have bought a place that is 2.5x less-expensive and it would have cost me the same amount. A lot of people like owning their home, it's more than just dollars-and-cents, they couldn't have handled the uncertainty, blah-blah. Fine by me, good for them. Myself, I am happy to have lived in a 2.5x better home for the same cost.

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Where is ericho to tell us how bonuses are going to blow our minds and Wall Street is lifting the real estate market? That was good stuff. I miss it.

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Unable to pull link to story but on Bloomberg today: "Wall Street Bonuses Climb 8% to $20 Billion, DiNapoli Says"

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DiNapoli was as good as many bears in this board. He predicted earlier that Wall Street bonuses would drop in 2012, but he was wrong.

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I thought the article said cash bonuses and didn't take into consideration deferred or other incentive.

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apt23 has been posting the same stuff, over and over again for at least the last 3 years. She is simply not willing to admit that she's missed the bottom in NY, and cannot bring herself to pay an "outrageous" price now for an apartment she would like.She also gets annoyed that anyone would dare ask more now than was paid in 2009 (which IMHO was the bottom).

apt23 will go on like this ad infinitum. now it's the suburbs for her, before it was Miami.Sad

greensdale-I am seeing similar anecdotals- 30-32 year olds finishing training program and going to jobs paying about 150k with spouses making variable amounts. Most are leaving NYC, although admittedly most came from outside NYC. Those who aren't seem to have no qualms about moving to places like Jackson Heights. 2 who have spouses on Wall St are in Brooklyn. Although some rented in Manhattan during training, none of the married ones planning to start a family are even talking about Manhattan-buying or renting. I was thinking of buying for investment, but don't know that today's prices will be sustainable when interest rates go up. Got unsolicited e-mail from realtor advertising rentals with ONE MONTH FREE RENT !

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Haven't followed thread long enough to figure out people's personal agendas. My dilemma is about whether or not to buy now as an investment. Live in Manhattan and love it, but was only able to afford it because we bought 21 yrs ago. Thinking of buying now, partly as investment, partly with the thought of letting my offspring take it over in 5-8 yrs. I am sure that it would pay off if I kept it for 20 yrs, and would be a source of income. But if offspring wants to live somplace else, and I sell in 5-8 yrs to help with downpayment -don't know that I won't lose. Haven't seen apt 23's threads , but....she's right that if you had put money into market in 2009, you would have done just fine...

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So greesdale, have you bought in the last few yrs.? If so, where?

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Note the fresh round of cuts announced. Banks are the first one to cut jobs when there is something coming.

There are a lot of structural events going on in the industry to warrant the job cuts (outsourcing, low volumes in general etc). If the banks were so clever they would have had lay offs in 2006 instead of having record industry employment in 2007.

greensdale, what did columbia county do?

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uwsbeagle

dont you remember the 2006 layoffs? I recall that was when the RE agents really kicked in their 'RE never goes down / be priced out forever' pitch.

"Banks and brokerage firms first started layoffs in the fall of 2006. By the time the financial crisis receded three and a half years later, more than 428,000 financial workers had lost their jobs nationwide — an 11 percent drop in the industry’s work force, according to Moody’s Analytics." NY Times

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I honestly wish that Streeteasy would block every posting which is just a personal vandetta against someone else. Even discussions/debates about the market going up or down are sometimes tinged with such sarcasm and diatribe- it gets really tiresome !

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