New York City may not follow the rest of the US into a slump
LOOKING back, 2007 was supposed to be the year that the "Find Real Estate listings and community news for New York City" residential real estate market slowed down and began to look a bit more like the slumping national market.But that didn't happen. While there were periods when condominiums and co-ops sat unsold because buyers and sellers couldn't agree on prices, the year ended with the average price of a Manhattan apartment rising to a record $1.4 million, though the number ballooned in part because so many wealthy buyers purchased extraordinarily expensive condos.No one is predicting that 2008 will be a repeat of 2007. The sprawling pieds agrave;-terre may still sell for millions at "More articles about the Plaza Hotel" the Plaza and 15 Central Park West, but in general, economists are predicting that prices will drop in some segments of the market and in some neighborhoods around the city. New York has had a very good run, and there are still a lot of people sitting around with cash,said Christopher Mayer, the Paul Milstein professor of real estate at Columbia Business School. But that doesn't last forever. There are already signs of a more sober market ahead: Wall Street workers may face leaner bonuses this year and in years to come, borrowers may have a harder time getting mortgages and foreign buyers may reconsider the potential returns of investing in New York. Mr. Mayer said that a national recession could weaken Manhattan prices even further because fewer workers could afford to buy in the borough.Diane M. Ramirez, president of Halstead Property, is less concerned about a recession because the inventory of property on the market is currently low. She said that in the recession of the late 80s, Manhattan dropped sharply because the city had an oversupply of apartments. We had a deeper, longer recession than most cities,she said. We lost 20 to 50 percent value. When trying to gauge the real estate market or, for that matter, the citys economic outlook the first stop is always Wall Street. Wall Street jobs make up 5 percent of the total jobs Find Real Estate listings and community news for New York City" New York City but 23 percent of the citys total wages, according to data tracked by the New York State DepartmenticesLabor. Annual bonuses are also tracked by real estate brokers with a fanatical devotion.History shows that a great deal of the bonus money is used to buy real estate. Financial workers are typically the first buyers to show up with the cash in the spring buying market, and this helps shape demand for apartments.That energy of the bonus money really does get the spring market percolating, Ms. Ramirez said.The bonus tends to be the starting gate for them. While it may seem counterintuitive, considering how much havoc the subprime crisis has brought to the financial industry, one analyst is predicting that 2007 bonuses, which workers will receive over the next couple of months, will be about the same as last years record bonus year for some bankers.These workers are compensated based on their performance for the whole year, and most banks did well leading up to the credit crisis last summer. So, while workers may not earn more than they did in 2006, they could still have plenty of money to put toward real estate.Alan Johnson, the managing director of Johnson Associates, a firm that tracks compensation data, said that over all, bonuses should remain flat for a broad spectrum of the financial industry.This year was a pretty good year for bonuses, roughly on par with 2006, some of them less, some of them more,he said.But, he said, that wont necessarily be true a year from now, and this knowledge could keep traders and investment bankers from splurging on real estate this year as they have in past years.Everybody sees the storm clouds on the horizon,because Wall Street firms have already had write-downs of more than $100 billion from their mortgage-backed securities businesses, Mr. Johnson said.If you are going to commit to some big purchase, it makes you pause. Your pay may go down.He predicts that by the end of 2008 employees at the top will be hurt the most: those whose total compensation of salaries and bonuses is more than $1 million could see cuts by 40 to 50 percent; those in the $500,000 to $1 million range could see cuts of about 20 percent; and those with pay of less than $500,000 could see 10 percent cuts.
