It is clear that the turmoil on Wall Street has reached historic proportions. In characterizing the potential scale of things last night, The New York Times noted that events might spiral to losses reminiscent of Black Monday. That, in turn, was the largest drop the market had suffered since Germany invaded France in World War II.

While no one is keeping an eye out for U-boats off the shore of Manhattan this time around, it is clear that the ramifications of these two weeks of market activity will touch nearly every market in the nation.

Not least of which, of course, is the real estate market that physically surrounds Wall Street. Unlike the city’s market as a whole, the luxury market has remained rather strong throughout the past two quarters.

The bankruptcy of Lehman Brothers and the ensuing events throws that into doubt. How events play out during the next week or two will be critical to the fate of the city’s real estate market. Monday was one of the most important days. The story is fast-evolving. As of this writing, the market has just closed, and here, in brief, are the major developments of the past 48 hours, with an emphasis on the latest developments:

  • Lehman Brothers have filed bankruptcy
  • The Dow closed 504 points down or 4.42%
  • Bank of America will buy Merrill Lynch for roughly 50 billion dollars
  • The Fed has asked Goldman Sachs and JP Morgan to put up $70-75 billion to keep AIG afloat.
  • The state of New York has floated AIG $20 billion to keep it afloat.
  •  It is doubtful Washington Mutual will be able to survive the next several months, as the shorts begin to hunt out the weakest banks.
  • Several months ago, there were five major Wall Street firms. Now there are two.

It is essential to keep in mind that the most positive news over the past two days has been Bank of America’s decision to purchase Merrill Lynch. This is highly preferable to seeing the investment firm go under. Bank of America is, however, based in North Carolina. While most of Merrill’s jobs will stay in the city, there undoubtedly will be substantial relocation to NC, if not outright downsizing.

All of this means substantial upheaval for the Manhattan real estate market. Especially in the luxury market, much of what was true last Thursday merely is no longer is the case.

This does not mean the market will enter a free-fall. It remains one of the country’s most active real estate markets, especially the luxury market. However, these events have pushed the market firmly in the direction of a buyer’s market. Very few sellers are going to be confident in their ability to sell their apartments, at least until the storm blows over.

So, now is the time to explore the luxury market. You may not find the place you are looking for, but in this time of turmoil, there is room to negotiate and negotiate hard. Be willing to make aggressive offers, if it seems there are few other potential buyers.

It may or may not be time to buy – it depends on what you find. It is time, however, to hunt for the steals that come from jittery sellers.

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