why shouldnt prices go down in Manhattan?

Wall St. just raised their pay, FYI.

"Wall St. just raised their pay, FYI."

If 10,000 people make $1,200,000 instead of 50,000 making $1,000,000 , is that upward pressure on the RE market?

They did not raise their pay, alpine you moron. They set aside more for pay in the first quarter. A large portion of this is for SEVERANCE for all the people they are laying off. The remainder is an amount no analyst who covers the sector thinks is sustainable. What matters is the annual set-aside and what they end up paying year-end. We won't know that figure until almost a year from now.

The remainder is an amount no analyst who covers the sector thinks is sustainable. What matters is the annual set-aside and what they end up paying year-end. We won't know that figure until almost a year from now.

The remainder is also an amount no analyst who covers the sector had predicted as recently as 6 weeks ago, yet here we are

And we'll have a very good idea of what year-end bonuses will look like in about 6 months - most banks have pretty much determined the bonus pool with a couple of months left in the fiscal year.

given the fact that the RE market in manhattan has evolved around a certaing number of banks always bringing in at least certain amount of new bodies into the city evry year..without that happeneing how does the new supply get absorbed ?

Jason10006 you are right, alpine292 you are so wrong. That NY Times article doesn't mean anything. GS always over-accrues in Q1. Pay overall when continue to go down to those that still have jobs, which will be few. UBS just did another large round of layoffs. BofA and Citi will continue to lay off as they restructure, and will face enormous pressure to minimize bonus payments. MS performance was poor in Q1. JP was strong but will not they along with CS and DB are pay followers. There is no reason to pay high bonuses when there are so many people looking for jobs and no threat of employees leaving to do something else.

There is enormous new supply of apts, both new construction and rental, coming online just as people are getting laid off and leaving the city.

Isn't a bit of a red herring, in the wake of an insane speculative bubble, to tie Manhattan real estate to real wages?

Even if wages in Manhattan stayed the same as they did during the boom years, we would see a depression in real estate because the bubble would have burst. No longer would people "invest" in properties with the ironclad conviction that the asset would appreciate.

It is wages that make Manhattan more expensive to live, but it was not wages that inflated the bubble, and there are no wages that can reinflate the bubble. Only the limitless lending that has now been curtailed.

marco_m - I think that the purchase market has evolved around the banks (and hedge funds and PE funds) having a certain amount of highly compensated bodies, rather than around them bringing in a certain amount of new bodies each year. The new bodies that the banks (used to) bring are more likely renters than buyers, at leas in the early years. You could add to this list the certain amount of new bodies for law, accounting and consulting firms, etc., and in total you get a pretty big change in entry level rental demand (I would think a reduction in the thousands this year vs. last year and earlier). These people represent a pipeline of future purchasers, but shutting off the inflow should affect rentals first and purchases with a fairly long lag. On the other hand, when some formerly highly compensated people no longer have jobs and most of the remainder are no longer so highly compensated, that affects the purchase market immediately.

marco - btw, just splitting hairs on your second post. Agree with the basic premise of your original post, although I think you're optimistic on winter 2010 (if by that you mean 2009 bonuses to be paid nine months from now).

wages inflated the bubble becuase you had people throwing around money without a care in the world. that is now gone.

the rental market indirectly lowers the for sale market because as rents keep going down, it reduces the benefits of ownership.

how do you value an apartment whose maintenance and taxes alone are greater than a comparable rental? in a declining market, i would say zero.

Everyone is always talking about wages, but consider the fact that Bear was, as I understand it, mostly employee owned. It was also the most NY centric of the ibanks. I wonder if anyone ever quantified the wealth that was lost here when it was sold off. Wealth that was likely leveraged at some multiple. Billions.

re: Bear, see description here. Employees and directors owned 38.7%
http://www.efinancialnews.com/assetmanagement/pensionfunds/content/2450071941

The deal later got recut at $10 per share, so the loss from Dec 2007 through deal closing was $4.8-4.9bn, rather than the $5.2bn referenced in the article. The loss from the all time high of about $172 per share in early 2007 was more like $8bn.

Multiply the $8bn by whatever percentage you think was concentrated here (as noted, the most NY centric bank) and you get the lost Bear wealth in the NY area. I would guess that $3bn in Manhattan, another $3bn in greater NY and $2bn elsewhere might be in the ballpark.

sideline..im saying dec 09 will be a repeat for the most part of dec 08 and dec 10 will see some money..so basically I think the next few months are going to see a complkete drop in the RE market

QUESTIONS ABOUT GOLDMAN SACHS' ROLE IN MARKET

April 28, 2009

SOMETHING smells fishy in the market. And the aroma seems to be coming from Goldman Sachs.

As you probably already know, stock prices have been roaring for seven weeks.

This has created a historic rally despite the fact that the economy continues to be in serious trouble, banks are still wheezing under the heavy load of bad assets, workers are being laid off each month by the hundreds of thousands and nobody seems to have answers to our problems.

All these issues are well known and there's no reason to replay them here.

I told readers at the beginning of the year that the economy would start looking better -- although not necessarily performing better -- in the spring because of statistical aberrations coming from Washington.

And I even predicted that stocks would rally because of the perception that happy days were here again.

So -- a big rally.

Prices had been up as much as 25 percent since March 9. And they are still up 22 percent as of yesterday.

But can you trust what the stock market is now doing any more than the rally last summer that ended badly or the one last December that ended horribly?

The optimists on Wall Street will tell you that stock prices always rally ahead of an improving economy.

And let's hope what is happening now is just that -- the chirping of Wall Street just before an economic thaw. There are, however, reasons to be cautious about Wall Street's celebration. And since nobody else is bothering to hurl caveats at you, I guess it is up to me.

According to an outfit in Sausalito, Calif. called TrimTabs, the flow of money from regular investors (that's you and me) into the stock market has been rather moderate considering the 7-week market run.

For the five days that ended Wednesday, April 22, for instance, TrimTabs estimated that people actually pulled $411 million out of stock mutual funds. That period coincided with a 2.94 percent drop in the Dow.

In the previous four trading days (one less because of the Good Friday holiday) the Dow fell 0.7 percent even though regular folks put $2.7 billion into stock mutual funds, according to TrimTabs estimates.

Since the beginning of March, when the stock market rally began, TrimTabs says investors put a total of $10 billion in stock funds.

That's a very modest amount. A source at the firm says he would have expected two or three times that amount for a rally that pushed stocks up by 25 percent.

http://libertymedal.com/seven/04282009/business/questions_about_goldman_sachs_role_in_ma_166505.htm

crazy conspiracy nuts.

marco - re: dec 08/09/10. Thanks for clarification. Agree. Very difficult to see much better than that.

Not sure, however, that this translates into a complete drop in the RE market in the next few months. Maybe a major drop in transactions as we get into the summer, but prices move in fits and starts because transparency is poor, sellers' perceptions/hopes are sticky and not so many really must sell at any given point. More likely next few quarters or so, rather than next few months, for the impact of the new reality to filter all the way through the broad market.

agreed