Crains: Wall Street bonuses to rise in 2007

If the rumor is true, watch real estate spike again in the first half of 2008. Buy after Labor Day but before the New Year. Manhattan is a demand-driven market. New condos will soak up some demand but this much disposable income fluxing into the market should push things up even higher in desirable neighborhoods / buildings, esp. condos. Most of these discussions don't distinguish enough between condos and coops, or neighborhoods -- hell even specific blocks. Really we should be discussing micro-markets: locations, building types, sizes. Very interesting discussions taking place on the rent-vs-buy threads but the fact is that the micro-market issue needs more air on these boards. The devil is in the details and generalizations (and statistical artifacts) obscure many of the important issues.

#2, because buildable sites are so limited in Manhattan and most of the boroughs, what you're saying doesn't really hold true. Wall Street money in the hands of 'A' will entice 'B' to sell his West 70s apartment. 'B' will buy in the West 90s from 'C', who will move to D's Morningside Heights. 'D' will move across Morningside Park to that Upper West Sidey corner of Harlem.

That's one reason why you'll be hard-pressed to find any neighborhood in any part of NYC that doesn't have new construction all over, and no problem selling/renting the units.

2 here. I take it that you're referring to the micro-market concept: that the transfer of real estate ripples throughout neighborhoods across a certain price point and tends to disperse any geographical "pools." Obviously you're describing a very theoretical "flow." In the middle of this flow are several translation points, or points of analogy: B looks for something "like" what he/she sold to A; C looks for an equivalent to what sold to B, and so forth. Those points of translation are fairly singular and introduce many factors, including perceptions about buildings, neighborhoods, value (not to mention diverging life trajectories, etc). So in fact I don't think the even dispersal process you're describing really happens, for various reasons. People also tend to try to reproduce things they already know, and their movement from one place to another won't follow some kind of price - value - geography grid. And A doesn't push B out by sheer force of capital, driving him / her to find something equivalent: B decides to sell to someone (anyone, Wall St. capital or not) and has specific reasons for doing so, etc. My own anecdotal sense is that the movement you're describing actually works in reverse: it isn't that people move down or out from one neighborhood to another but that people move up and in from one neighborhood to another: the upper west sidey corner of Harlem is affordable to C but not Morningside Heights or the West 90s, whereas B can afford more (or less), and A more still. C buys the best he / she can afford, given various parameters; B does the same; A does the same.

As for new construction, I don't have hard statistics, but my sense is that the last 5 years have seen a real surge in new condo building, despite the limited floor space: building out, building up, conversions, etc. Wall St. money likes virginal space, luxury amenities, good location, general finish, which is why I think new construction can absorb *some* of the additional demand. In a sense its circular, since the demand is for the new condo, so the new condo is built to meet the demand -- much of this bonus money won't even look at an older coop, for instance, which remains in a different micro-market defined by type (not to mention location, finish, value, etc).

My thoughts, anyway, off the cuff.

Oh well, like the dumbasses have been saying all over these boards since 2004,

the market's gonna be down at least 20% in 2005....

the market's gonna be down at least 20% in 2006....

the market's gonna be down at least 20% in 2007....

the market's gonna be down at least 20% in 2008....

little black arrow this, little black arrow that...

little black arrow this, little black arrow that...

little black arrow this, little black arrow that...

YYYAAAAAAWWWWWWWWWWN....

no kidding you are right on. Will it go up for ever at this rate? Of course not. But the fact is that even a massive trauma like 9/11 has been digested by the market. Of course that was a singular event, whereas a systemic crash would have a longer term and probably a more pernicious effect on prices. What I would like to hear someone who knows something write about on this site is the gap between (relatively) high end markets like Manhattan and mid-level / low markets in most of the rest of the country. Is the income disparity in the US currently so great and so differentiated geographically that Manhattan is for all intents and purposes insulated from a large scale RE downturn? This "correction" is real and long-lasting, it seems to me; economic fundamentals in the rest of the country (read: real and even more importantly perceived wealth)+change in mortgage markets have changed the landscape. Piles and piles of places for sale in every residential category. But in Manhattan it remains strong, despite slowdowns / corrections of a few months, as in 2nd half of 2006. I would like to see some intelligent discussion of this issue and not just opinion.

I agree. I mean, at SOME point, the music has to stop playing and there will most assuredly be some people in Manhattan who bought homes that find themselves 'without a seat' having made an inopportune purchase. I have no issue with that. But the fact that the naysayers think that they can actually time the real estate market and call the correction shows how desperate they actually are. You can't time a markest, and even a stopped clock tells the time correctly twice a day. Of course they'll be correct at some point, but not because they understood the market - they'll be right because inevitably, no market goes up forever.

#7-- I counted 5 cliches in your post and zero substance. Have you an independent intellect?

If you do not believe that units are staying on the market significantly longer than in years past, and price appreciations have zeroed out, you;re livivng in a dreamworld.

#8 - I counted three personal attacks in your post and zero commentary regarding the subject at hand.

Just because because you're a bitter renter, please don't vent your anger and frustration at others on the board. It was just an observation - I really didn't mean for you to feel that my prior post was directed at you personally, as I do this.

Maybe you could just take a 'time out' for a few moments....

#9:

NYC apartment sale prices surge

By: David Jones
Published: May 14, 2007 - 2:35 pm

"The Real Estate Board of N.Y., in its first-ever quarterly report of citywide residential sales, said sale prices for New York City apartments rose 23% to $745,000 during the first three months of the year, compared with $605,000, a year ago.

The median sale price for New York City apartments increased 20% to $450,000 in the latest quarter....Manhattan saw the biggest increase of 16%, on average....

The average price per square foot for citywide apartments rose 14% to $733, while the median price surged 28% to $671 per square foot....Manhattan, once again, took the lead with the highest average sale price at $1.1 million...In Manhattan, the average price per square foot for apartments rose 3% to $1,103..."

What part of this DON'T you understand?

I guess you oughta join #7 in your 'bitter renter dreamworld.' Just because you want the market to tank so that you can engage in schadenfreude, doesn't mean it's gonna happen anytime soon. But don't worry - as I said above, even a stopped clock tells the time correctly twice a day - you'll be right - eventually.... and then you can run through the streets of Manhattan naked, rejoicing and yelling at the top of your lungs "see, I TOLD you I was right!"

2, 4, and 6 here, to 9: "units are staying on the market" is an unhelpful generalization that gets you nowhere. Some unit are staying on the market; many are not. I would be surprised if "price appreciations" really are "zeroing out" in any Manhattan neighborhood -- I really would be.

11-- REBNY is an industry hack organization, its in their best interest to make you think prices ar eon the uptick. what they fail to mention is the historic number of new sale condos which closed in Q1. Keep listening to their numbers, guy.

btw, 11-- i am one of those wall street guys and my bonus ain't flowing into residential r.e. this year or next.

Dammit, I should get into the finance industry. Maybe B-school so I can roll with you all...

Amazing #13:

There's no data to support you, you make up your own.

The data does come out, you dismiss it out of hand.

So basically, you only accept data that's already congruent with your own pov.

No wonder your "wall street...bonus ain't flowing into residential r.e. this year or next..." Based on the kind of analyst you are, your bonus probably wasn't big enough after tax to act as the deposit on a nice studio, let alone buy it outright in cash....

Wall Street bonus...what does that have to do with one bedroom apartments...That's where the prices will drop in your average manhattan building.

Wall st has all types and most of them looking to buy 1BRs. Every year there is a new crop of people who have saved enough for the downpayment-people who finished grad school a few years ago, paid off student loans and need a place to live

A new crop does not have the money to pay $750k for an apartment...mortgages are not easy to get as before.

#16 and #19 you are colossally stupid. I could buy the average manhattan apartment in CASH and qualify for a mortgage that would make your empty heads spin. my bonus after tax last year was likely more than you make in a year so pipe down and keep dreaming of your home equity which is likely the largest "investment" you own.

And #16, I'm not an "analyst". Far from it.

Ohhhh, #21, so you're a trader? Well, unless you own your the fund, I am quite sure that my bonus crushed yours.

I am curious (as someone not in finance): just how big of a bonus are we talking about? Seriously. We're all anonymous here -- I'd like to know some numbers. Over 1 mill (before taxes)?

#22 here - without going into the fine details, seven figures - after tax.

ok #22 - how many apts do you plan to buy with your 7 figure bonus? The upper end of the market may hold up because of wall st numbers, but the mass market (anything under $2MM) is going to go down hard..

seven figures is a shit load of money. No offense, but what could you possibly do on a day-to-day basis that justifies that level of compensation? I teach at a top university and get paid six figures, which is very high for my rank. I shape young minds and "keep America worth protecting." lol. I'm at the top of my field! It lets me buy a decent place in Manhattan, with other assets. And it will go up (modestly). But what do you even spend a seven figure bonus on if you *don't* spend it on real estate?!

#21 and #22 are BSing.
There is a certain lingo that you use on wall st and they aint using it.

I'm not going to give them any more ammunition except that all they had to say was something like 3rd year assoc or S&T or if not in banking the other terms that they should know but they didn't.

>> But what do you even spend a seven figure bonus on if you *don't* spend it on real estate?!

Umm exactly. Diversify.

#16/22 here responding.

#25 - I plan to buy exactly one apartment. Which I am closing on in about thirty days. And it is in the 'over $2MM catagory' as per your comment.

#26 - As to whether my pay is justified, all I can say is that I have made someone who DOES work on the Street a great deal money over a sustained period, and they have been fair with me in sharing the wealth. Aside from the purchase of my new place (see above), I actually save a great deal, give 10% (after tax) to causes that my wife and I support, and do spend a modest amount on art (our one vice, I'm afraid!).

To #27 - No BS here, and no ammunition required. I never said that I worked on the Street. I don't. But what I do (and I would prefer not say) is related in a very tangential way. So my use of the 'lingo,' as you put it, doesn't apply.

"Diversify" is incredibly boring. That isn't "spending." That's "saving." Are you telling me that you aren't blowing your wad on fast cars, fast women, and expensive booze? In exotic locations? In tailored menswear? Dude, you are missing your moment. At least I have time, time, time...teach two days a week...five day weekends...four months in the summer, natch...did I mention the month at Christmas? Lovely. I'd be happy to show you how to spend some of that money, my friend, when you're done working. And I promise it won't be on real estate.

to #30 (#29 responding):

I love it!

Sadly, at my advanced age, I think fast cars and expensive booze are ill advised. And I add to that if you knew my (lovely and beautiful) wife of many years who suffers me, fast women are DEFINITELY right out! - But I wouldn't have it any other way - she's the best.

Tailored menswear? Yes, definintely - Savile Row. And fortunately for me, my job is incredibly flexible. I'm tied to no person and no clock, and in addition, I travel to some wonderful places annually first class as part of the deal. I actually hope that I never stop working - I love what I do, and feel very fortunate to have found a vocation that I feel that way about AND that I recompensed for as well as I am.

I would love to respond sarcastically, #31, say I, #30, #26, etc., but I can't: it sounds too good, and probably richly deserved. Fortune favors the...whom in this case? Who knows. The whole point to Fortune is that you never know whom she'll favor. But I have been favored, so I really can't complain. Great relationship with a supremely talented woman; incredibly vital, youth-preserving, heady job (students are fantastic); constant conversation and creative flow; the respect of my colleagues; radical autonomy, in so far as that's possible; fair compensation; regular research leave; much travel -- and tenure (not to be underestimated).

OK, folks: now that the saccharine is out of the way -- can someone on this &*@# board please indulge my fantasy of making seven figures a year and TELL ME SOME HEDONISTIC STORIES OF THE PLEASURES THAT MONEY CAN BUY!!!? COME ON, PEOPLE, YOU ARE LIVING IN NEW YORK!!! spend some of that hard earned dope and enjoy it for the rest of us, puhleeze!

Who is earning these Wall Street billions? #14, #15, and #23: I would venture 99% of everyone who works on the street bonuses about $50k or less. (I am at $20k, accounting.) #29: I'm leaving my corp job to invest on my own, full time. I hope to build on what I was doing on the side into something more successful. I'm curious what kind of work you do that you can love so much, and how you found it.

#29 here:

I'm not in any way trying to be opaque, but I hesitate to discuss the specifics of what I do because it would basically 'out' me. I can say that as far as discovering my metier, I began doing it as a hobby in high school, and by college it was something that began generating enough money to keep me loan free. It was just one of those deals where I guess I was lucky enough to find something that I was natually gifted at and really enjoyed at an early point in my life.

#20 here--ok #22 your bonus beat mine, assuming you're not full of shit. i'm 32 and a vp at a bulge bracket so you can guesstimate. be honest though--is your bonus really a fee split?

#26-- personally, I think teachers at "top" universities should be paid less than police officers. Everything truly useful I ever learned was before you guys got to me. I found them embittered and pathetic, frankly. Not all , but most..

#33-- 99% get 50K or less? of course a small percentage get the most in the waterfall but that 99% figure is ass talking.

#35 again....hey #22/#29/#31 -- how advanced an age are we talking about here? I'd hate to think I'm measuring dicks with my dad.

#22 here:

#20 - it's not a fee split, per se. I'd deicribe it as more of profit share deal. I'm mid 40's, so being your Dad, while technically possible, would be highly improbable!

#33 here.

Congrats to you, #29. I'm still looking for mine.

#20/35: "99%" was figurative. I don't know the actual %. I know of no one at my corp -- S&T div of a bulge bracket bank -- who earned a bonus of 6 figures or more, exclusive of traders and sales (and that's less than a dozen). The IB is a differenct story. I don't know anyone personally who made the extra big bucks, but they did well as a whole.

Has anyone mentioned the low dollar as a driver for this real estate market? Foreigners buying heavily into it.

FYI all-lots of people with just pure technical/quantitative skills-analysts/strategists types take home over 400k/year. And many people in this group buy in Manhattan and every year there is a new pool of people that has saved 300k+ to afford the down payment etc

400k income with some savings should be able to buy into the 1.5-2.0M range

#20 here---#33--there's no money in accounting. you should transition into law or ibanking if at all possible. accountants are a dime a dozen and, frankly, lawyers have better personalities...and thats sad. ibanking is, in a word, where the money is (o/s the fund world).

back on topic - so someone explain to me how are all these wall st people (even with their 7 figure bonuses) going to save this real estate market? How many apts does one actually need? Except for the high end of the market 3MM+, this market is going down hard.

Yeah, maybe it will - like it did in 1990-1995.

Then it will come back again, like it did in 1996-2006.

Then, eventually, it will go down again.

Then, eventually, it will go up again.

Then, eventually, it will go down again.

Then, eventually, it will go up again.

Then, eventually, it will go down again.

Then, eventually, it will go up again.

Then, eventually, it will go down again.

Then, eventually, it will go up again.

Then, eventually, it will go down again.

Then, eventually, it will go up again.

Then, eventually, it will go down again.

Then, eventually, it will go up again.

Then, eventually, it will go down again.

Then, eventually, it will go up again.

Then, eventually, it will go down again.

Then, eventually, it will go up again....

#43--- you assume there is a disrete pool of wall street people. wall street is a revolving door of people going in/out. NYC is one of the top finance hubs on the planet therefore there will always be a plentiful supply of capital emanating out of the street to plug up r.e. corrections and the like. look at r.e. prices in london and hong kong. you cant compare nyc r.e. to florida or arizona.

25 and 43, are you serious. Do you know how many lawyers, wall st people, doctors and other professionals there are who aren't making huge $ but making enough to buy plenty in the below 2mil (#25's number) market. Even 2-3 mil.

Wall St numbers going up, big firm lawyers comp went up significantly last year and it may happen again this year.

People aren't making less money, in general they're making more. The market may go down but it won't be for lack of funds.

#46 -- where are you hearing that big law comp may be going up again this year. it went up $40K last year. not peanuts, but certainly nothing to retire on.

salary went up 40k, at the right firms, bonuses were up significantly too. salaries are just being bumped in chi/DC to match last years NY bumps, that plus more and more young lawyers looking to leave, puts pressure on NY salaries again.

#46 - yes manhattan has a lot of rich people, but not enough to support this bubble

Forclsures in Manhattan creeping up: http://www.nytimes.com/2007/05/27/realestate/27cov.html

#50 has a problem with reading comprehension - those SATs are a bi@#tch huh?

I read the article and it said that one lender noticed more missed payments in manhattan and predicted more foreclosures. Please read well next time you post. It didn't say foreclosures were creeping up - but was predicting. Most of the article is about the boroughs. I'm not denying this may not occur, but read before writing next time.

#51, you're nitpicking - missed payments/foreclosures are not the same, but theyire obviously closely correlated and either way it's a bad sign. Anyway, everyone knows that Manhattan is a lagging indicator, and what we're seeing across the country is affecting the Boroughs, and eventually will hit Manhattan as well.

#49, you don't need to be rich to buy an apt in Manhattan. And apparently there are enough people to support this "bubble", or else we wouldn't be here in the first place. Supply and demand. Something might happen, economic slowdown, terrorism, etc, that might curtail demand but otherwise there is no reason to predict a significant "correction," you guys do it just because prices are "too high," well they're high for a reason, because people have been buying.

So #29 and #34, you are the art dealer in this thread
http://www.streeteasy.com/nyc/talk/discussion/1624-_630_000_000_spent_on_contemporary_art

#48-- #46 you're an ass talker. Lawyer bonuses did not go up "significantly" last year.

Little black arrows pointing down. NYC 1.1% down YoY

http://www.marketwatch.com/news/story/us-home-prices-fall-first/story.aspx?guid=%7B1403381F%2D45B8%2D4997%2D9606%2D0A98635B4280%7D

No kidding - that's -1.1% for ALL of NYC. Not prime Manhattan. There were a bazillion foreclosures in parts of the Bronx and Queens last year. Know how many foreclosures in prime Manhattan residential real estate below 96th Street?

Three.

Little black arrows down in the Bronx.

Little red arrows up in prime Manhattan.

And most definitely, little red arrows WAAAAAY up for all you bitter renters throughout the greater NYC area.

The fact that you can't keep your facts straight and parse precisely what this article was saying shows exactly how much your super fine mind strggles to fit square pegs in round holes.

That somebody dropped "metier" mid-board might have caused my failure to notice any discussion of a relationship similar to what should be examined here:

http://piggington.com/historical_home_prices_payments_rents_rates

True, Ron Burgundys of the world, we're not in San Diego, but that picture holds for Manhattan, too. The same minds at work developing the next wave of tax-proof, triple-digit yielding investment vehicles are sure to laugh in the face of 6.0% 10/1 arms, given an ING Orange Savings account gets you to nearly flat. This house party has about another 150 basis points of booze.

#57, first of all, not sure how you are able to say there were only 3 foreclosures in Manhattan with such precision, but anyway even if that was the case, that is not directly related to home prices decreases. Certainly you can have the value of your home go down and still not be in danger of foreclosure??

looking forward to it

Who brought this guy to th party? He's great!!!

2007? We could only hope

"little red arrows WAAAAAY up for all you bitter renters"

> the market's gonna be down at least 20% in 2008....

No, never, no way, no how.

This is my favorite comment, post #46:

"25 and 43, are you serious. Do you know how many lawyers, wall st people, doctors and other professionals there are who aren't making huge $ but making enough to buy plenty in the below 2mil (#25's number) market. Even 2-3 mil.

Wall St numbers going up, big firm lawyers comp went up significantly last year and it may happen again this year.

People aren't making less money, in general they're making more. The market may go down but it won't be for lack of funds."

ahhh, memories from the past... but they were soooo adamant back then, just like how some are soooo adamant now.

Denial is a powerful thing...At least he didn't mention the irish carpenters...

lookin good this year

ha