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Posts Tagged ‘Wall Street Bonus’

Real Estate Speculators Are Switch Hitters: Is It Time To Bat Lefty (Stock Markets)?

April 12, 2006 | 12:01 am |

A very self-serving survey by TD Ameritrade discussed in the article Speculators Start To Eye Stocks As Home Sales, Price Gains Slow [IBD] but it provides food for thought.

Guess whether the survey favors the stock market or real estate?

A recent TD Ameritrade survey asked several questions of investors, including “What is the best type of long-term investment?” — real estate or stocks. Those picking real estate peaked in July, with 48% of investors favoring housing vs. 32% for stocks. That came as many real estate stocks and home prices in many markets topped.

The following seven months showed a shift back to equities, with stocks edging past real estate as the preferred investment choice in February — 40% vs. 38%.

The results would appear to be bias and thin but a good point is made. With inventory and mortgage rates rising, investors might start looking toward the stock market in search of returns on par with real estate seen over the past 5 years. This is not to say the current stock markets are at the point were their returns are better than real estate, but perhaps, the risks are lower. Its something to consider.

On one hand, the exit of speculators could be reduce some of the volatility in pricing, mostly by easing upward price pressure.

However, the loss of transaction volume would reduce overall demand in markets heavily dependent on speculators resulting in a significant drop in the number of sales and an eventual drop in prices. Markets with limited investor activity may not see much of an effect at all.

Note: In an ironic twist, Manhattan, with its limited exposure to speculators and dependence on Wall Street, would likely benefit from this transition when and if it occurs. More churn in the stock markets generate more income to Wall Street firms, which generates more bonus income to its employees, which generates more disposable income to purchase real estate. [self-fulfilling logic -ed]


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[Media Chain-links] 1Q 2006 Manhattan Market Overview

April 4, 2006 | 7:39 am | | Public |

The 1Q 2006 Manhattan Market Overview that my appraisal firm, Miller Samuel, prepares for Prudential Douglas Elliman, was released today. I always think its interesting (actually, its fun) to see how the various media outlets (Big and Small Media, Blogs) respond to the exact same set of data and how the real estate brokerage companies who write alternative reports, frame their comments.

This list is in no particular order and excluded all the redundant articles (ie news feeds). I will keep adding to it through the week after the initial post.

Apartment Prices Up Again After a Slump in Manhattan [NYT]
Housing frenzy slows down[NYDN]
Wall Street bonuses lift Manhattan apartment prices [Reuters]
Reports: Luxury Housing Boom May Be Reaching Its Crest [NY Sun]
First Quarter Reports: Thousand Island [NYO The Real Estate]
Housing market still steady [NY Newsday]
City Apts. Defy U.S. Bubble Trouble [New York Post]
Condo boom boosts Manhattan real estate market [Inman News]
Manhattan housing market shows weakness [CNN/Money]
Manhattan Apartment Sales Cool Off [TheStreet.com]
Manhattan Apartment Prices Climb at Slowest Pace in Three Years [Bloomberg] IMMOBILIARE: SALE, SI SGONFIA OPPURE CROLLA [Wall Street Italia]
Manhattan housing market booms in first quarter [The Real Deal]
State o’ the Market Update: Through Thick and Thin, ‘Essentially Flat’ [Curbed]
Brokers say New York real estate market is cooling [Financial Times]
[Wall Street Bonuses Fuel Manhattan Real Estate Surge [DJ]](no link)
A game of telephone [Property Grunt]
Manhattan Market Up, Psychology Down in Q1 [Brownstoner]
Real Estate Rashomon [Walk-Through]

Here are a handful of radio and tv clips as well.


[Bloomberg TV]


[WNBC-TV]


[WPIX WB11]


[WABC-TV]

[WCBS Radio]


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The Pendulum Swings Back To The Middle

March 6, 2006 | 12:05 am | Public |
Source: NYT



In Saturday’s front page story In Hoping for Best in Home Sales, 2 Sides Sit Tight [NYT] Vikas Bajaj and David Leonhardt explore the state of balance that is returning to the real estate market: As a result, the housing market is now in a deeply confusing state, with average prices still rising even though homes are taking much longer to sell and the number on the market has soared. Sometime soon — probably in the spring, the peak sales season — one side or the other will have to capitulate, many economists and industry executives predict.

(shameless plug: This article used our stats for Manhattan and NAR for the remainder of the country.)

One of my main concerns about a shift in the pendulum has been the void that occurs between buyers and sellers and how long it lasts. Will the sellers cave and be more negotiable or will the buyers simply walk away?

Right now, its been a little of both as the number of transactions have clearly declined but prices are holding, if not rising. Cendant describes it as a pregnant pause, a disconnect between sellers and buyers.

In Stephanie Rosenbloom’s front page real estate section article A Slower Market, With Wall Street Fizz [NYT] she describes the market as more sober and measured. The pace has slowed, there is more inventory and buyers are taking time to shop around.

(shameless plug: this article uses our stats as well.)

Buyers have more inventory to choose from and properties are staying on the market longer. She comments on how Wall Street bonus money is so important to the Manhattan market and uses this quote: “We are so dependent on the money from Wall Street,” said Mr. Lewis. “If Wall Street is a shark, the real estate industry is the thing that cleans its teeth.”

Basically, the message in the article is that the market is still doing fine but its not as frenzied as in years past. One item I thought was interesting was that buyers are waiting longer to make offers and at lower amounts yet are often surprised to find that the apartment has already been sold. If you believe all that you read, you have the impression that there are no buyers out there.


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Wall Street Bonuses Equaled Afghanistan’s GDP

January 24, 2006 | 10:34 am |
Source: USAid.gov

Wall Street bonuses were $21.5B this year which made many real estate brokers happy over the past two months. There were many critics of the housing market who said that the bonus money would not go into real estate since Wall Street is comprised of savy financial types who know where to invest their money.

I think the problem with this sort of thinking is the lack of understanding as to how much money the bonus income really was. Its a lot.

This post was inspired by my fav Wall Street blog Under The Counter which refers to the story Wall Street bonuses dwarf some countries’ economies [Baltimore Sun].

“But, seriously, something’s wrong with this picture. According to the CIA’s ranking of gross domestic products (purchasing power parity) around the world, $21.5 billion is more money than the GDP of each of two-thirds of the world’s countries. The 2005 bonus amount distributed among 172,000 people was exactly the same as the 2004 GDP of Afghanistan, population 30 million.”

“U. S. GDP for 2005 was $12.37 trillion. In such an economy, the $21.5 billion Wall Street handed out in bonuses seems like a drop in the bucket. But it means that in 2005, Wall Street handed out more in bonuses than the U.S. government distributed worldwide in development aid, except in the countries we’ve invaded.”

This was a fun fact…

According to the New York comptroller’s office, the year-end Wall Street bonuses for 1986 averaged only $13,950 that year.

It was $125,000 in 2005.

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Its No Secret, But Now Its Official: Wall Street Bonus Money Sets Record

January 13, 2006 | 9:34 am | |

Many markets have a primary industry that influences their respective housing industry. In Redmond, its Microsoft; in Detroit, its the Big 3 [Detroit News] and in Manhattan, its financial services and their associated bonus income [NYT]. Wall Street accounts for roughly 6% of the city’s jobs and 20% of its personal income. Bonuses typically account for more than 50% of personal income in much of the sector. Its always played a significant roll in the real estate economy, good or bad.

When the New York State Comptroller announces the bonuses paid every year, its already old news. Most people know, or have a sense of knowing by the second or third week of December how much their bonus will be.

There has been a lot of discussion about whether this year would be different, that Wall Streeters would not invest, despite the record bonus money that would be paid out.

  • Would Wall Streeters use it to buy real estate?
  • Does the fact that the bonus money was more concentrated at the upper echelons mean that only upper end properties would be sold?

Early indicators point away from the naysayers, but the jury is still out. Most of the CEO’s of the Manhattan based real estate brokerage firms I have spoken with indicated that they saw a surge in sales activity starting immediately after Thanksgiving, a few weeks before the bonus amounts would be known. Our firm saw a significant up tick in the number of sales that we appraised in October and a surprising number of $20M+ purchases were made.

My first reaction was that this was simply pent-up demand from two consecutive quarters of fewer transactions than we saw in the first half of the year. I expected the the number of sales to drop off after the first of the year.

Wrong.

We are seeing an elevated level of sales activity across the board, not just at the high end. Its not clear if this is a short term blip or not. Long term mortgage rates have been trending down since mid-November [Bankrate], possibly setting the stage for a more favorable real estate mindset in the first few quarters of 2006.

However, don’t expect an official announcement about that.

[Webmaster’s note: I’ve been a little light on the number of posts I have presented over the past few days. Its all Inman’s fault. I have been attending the Inman conference this week and its really been refreshing. I enjoyed being there for no specific reason other than a lot of new ideas and products, great information and a whole lot of smart people (self excluded). I’ll be back on track Tuesday, after all, its a long weekend. jm]


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Bonuses Expected To Save The Day

November 8, 2005 | 10:47 pm | |

Wall street bonuses are expected to rise 20% to 25% over last year [WSJ] which was already a good year. Investment bankers are expected to reap the largest gains [NYT].

Historically, bonus money flows through the real estate economy in New York at the beginning of the year. Wall Street provides in the vicinity of 20% of personal income and only 6% of the jobs. Its important to the real estate economy.

Other Bonus Stories
Manhattan After The Hoopla Over A 12.7% Drop: What Really Happened In 3Q 05? [Matrix]
Brokers Anticipate Sales Boost As Wall Street Awaits Bonuses [NY Sun]


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Manhattan After The Hoopla Over A 12.7% Drop: What Really Happened In 3Q 05?

October 9, 2005 | 9:05 am | | Milestones |

After the release of our 3rd quarter Prudential Douglas Elliman Manhattan Market Overview last Tuesday to the media and the frenzy of coverage during the week as a result, the New York Times ran an excellent overview of the market story this weekend called A Mixed Message [NYT].

Since then, I have received many inquiries about the state of the market over the week from real estate brokers, wall street firms and lenders to interpret the statistics in the report that were played over and over in the media firestorm. Whats been fascinating about this whole experience is how much coverage was given to the average sales price statistic, which could not stand on its own without explanation. Hopefully I don’t sound too cynical but this stat was likely used because it showed the most negative result.

Here’s a quick list of the highlights of the current market that are most useful:

  • The average price per square foot set an all-time record reaching $984 per square foot and rising 1.4% from the prior quarter. This is the telling statistic. The overall market increased this quarter, but not at the same torrid pace as before. The rate of appreciation has eased. In fact, since larger apartments generally sell for more on a per square foot basis than smaller apartments, one could make the argument that the shift in unit mix also tempered this indicator as well.
  • There was a significant shift in the mix of apartments that were sold. The average sales price dropped 12.7% because the market share of entry-level apartments (studio and 1-bedrooms) spiked 5% and activity at the upper end dropped off.
  • Entry-level sales surged because of concerns over modest increases in mortgage rates are expected. Of course, this has been the speculation since mid 2003 but this time, with rising fuel prices, comments from the Federal Reserve about housing, mortgage rates may actually rise.
  • High end sales activity eased rather than prices dropped. The luxury market average sales price dropped 26% from last quarter because fewer sales at the upper end occurred. There were 17 sales at or above $10M in the 2nd quarter and only 4 sales at or above $10M tracked in the 3rd quarter. In fact, a high end broker contacted me to say there were 5 such sales this quarter, but didn’t realize that one of them closed in the prior quarter. Nevertheless, whether 4 or 5, the sales activity was well below 17 sales. This doesn’t indicate that prices collapsed, but that a shift in the mix of apartments that sold in the upper 10% of the market.
  • Inventory did increase this quarter and was more heavily weighted with condos than co-ops. Since inventory came on at generally the same pace as the number of sales eased, inventory built up. This was attributable to seasonal considerations (thats a stretch) and bad economic news, rising gasoline prices, over saturation of bubble speak for the past 6 months and negative economic news relating to the 2 hurricanes.
  • There are expectations of record Wall Street bonuses at yearend due to the solid year seen by investment bankers and a number of other sectors in the financial district. Historically, Wall Street bonus income has flowed through the real estate economy after the New Year.

Here are a handful of all the interviews I did which basically re-iterate most of these points.


[Focus on Business (Canada)]


[Bloomberg Television]


[WCBS Channel 2]


[WNYC Radio (Brian Leher Show)]


[WNYC Radio]


[Bloomberg Radio]


[WCBS Radio]


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