Gregory J. Heym
Executive Vice President, Chief Economist
Exec. Vice President
The annual sky-high Wall Street bonuses are falling — by an estimated 10 percent this year. So announced state Comptroller Thomas DiNapoli yesterday (just in time to coincide with our Money Issue), no doubt setting off much manicured-nail-biting. What does this mean for NYC real estate, a market now accustomed to massive infusions of bonus cash? We asked around.
Brokers around town say the condo market was flattening anyway, and a drop in bonuses will temper demand for upscale units — but not slow down starter homes or trophy sales. “Bonus season, as nice as it is, has minimal effect on our market in general,” says Andy Gerringer, who heads new development marketing for Prudential Douglas Elliman. “It's not like 500 financial professionals decide to buy a home all at once — many of them already have nice homes.”
Really high-end apartments go mainly to international buyers who don't depend on Wall Street bonuses for down payments. “The weak dollar has brought me many foreign buyers recently, and I think it’s helping the absorption rate,” says Halstead Property's Charles Hawkins. “Increases in prices on large apartments will slow down, while smaller units will gain in price, resulting in, I predict, a flat market. Apartments will be on the market 30 days longer.”
Even that month could mean price dips for new buildings in transitional neighborhoods, with agents trying to fill up units fast. Logic tells you that when the Wall Streeter has less cash to flash at an interior designer, the interior designer thinks twice before buying a place at today's price. Prime brownstone Brooklyn, though, seems to have established its bona fides in the last boom. “Rents are still going up on 600 square feet on the Upper West Side over a garbage dump,” says Marc Garstein, president of Warren Lewis Realty in the Slope, “and people can come out here and live. A 10 percent drop in a $300,000 bonus isn't that much.” And co-ops are safe.
“If you're relying on your bonus, you probably wouldn't pass the co-op asset test anyway,” says Greg Heym, chief economist for Halstead Property. Condos in general may abide — Heym points out that “we'll have to see how many buyers are out of the market” by the time new units open en masse. Condos on Wall Street, arriving in a glut, figure to see the most concentrated pricing pressure.
“Last year's bonuses were way beyond anything we've seen before, so it's a little premature to say that the sky is falling,” says Andrew White, director of the Center for New York City Affairs at the New School. “A 10 percent decrease still keeps Wall Street bonuses at extraordinary height.” Like Heym and Garstein, White is worrying more about how the bonus sag might presage a broader economic cool-off. The thing that would really scare the brokers — Wall Street layoffs — probably won’t emerge until spring. —Alec Appelbaum
Tuesday, October 30, 2007