The New York City Real Estate Market has been cooling as of late. While it was literally the fastest growing real estate market in country during the third fiscal quarter, analysts believe that this quarter was considerably slower than the previous. To be sure, things haven’t gone so far as to become a buyer’s market. Rather, something more along the lines of a “buyer-seller detente,” to use the words of the New York Times, has emerged as of late.
Detentes, as we learned from the Cold War, are fragile things. So, it has been with bated breath that real estate brokers focusing on New York City’s luxury housing market have been waiting for the numbers from the financial industry’s bonus season. The financial industry in New York City is the second largest in the world – behind London – and a huge employer of those that live in New York City’s luxury homes. With macro economy-shaking losses in the financial industry this year which stemmed mainly from managerial incompetence, many analysts were worried that bonuses this year would be smaller than last year.
It seems, however, that such was not the case. Despite glaringly incompetent investment strategies by a number of the largest banks in the country, bonuses for the financial industry had another record-breaking year. While this may be bad news for those that ponder the fundamental role of accountability in a capitalist system, it is great news for those selling luxury homes in New York City.
Bloomberg News Services, for instance, reported last week that securities firms will spend a record-breaking amount on end-of-the-year bonuses: roughly $38 billion. Such huge numbers defy the predictions of many analysts, and will, in all likelihood, rapidly increasing demand in the city’s luxury housing market.
While demand for brownstones is already so high that their prices will likely not increase dramatically, it seems probable that luxury apartments and co-ops for sale will see a notable increase in interest from potential buyers. The recent report on the nation’s manufacturing industry has alarmed a number of economists into a warning of a national recession in the near future. Furthermore, most real estate markets are expected to function under the shadow of sub-prime related foreclosures throughout all of 2008. However, as this year’s financial industry bonus numbers prove, the luxury housing market in New York City is one of the markets least connected to trends in the national economy generally and even the housing market specifically. 2008 is not likely to be a booming year for any housing market, but for the luxury housing market in New York City, the next several months will probably see a flurry of activity. It is doubtful prices will decline during the rest of the year, and rapid long-term growth in value is expected to resume in 2009.