Wall Street Reorg: Impact on Real Estate?
After a weekend spent huddling together, Wall Street chieftains were unable (or, more precisely, unwilling) to come up with a plan to save faltering Lehman Brothers, which is now expected to file for bankruptcy. Merrill Lynch, which had seen its shares drop along with Lehman’s in recent days, agreed to be acquired by Bank of…
After a weekend spent huddling together, Wall Street chieftains were unable (or, more precisely, unwilling) to come up with a plan to save faltering Lehman Brothers, which is now expected to file for bankruptcy. Merrill Lynch, which had seen its shares drop along with Lehman’s in recent days, agreed to be acquired by Bank of America for close to $50 billion. Meanwhile, questions about giant insurer AIG’s ability to weather its own set of mortgage-related problems continued to mount. My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen, said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration. The big question is whether these moves will increase investor unease or, by removing a few of the major question marks, hasten its recovery. The same can be said for the local real estate market. While many of Merrill’s remaining 60,000 employees will undoubtably be kept on, the same can’t be said for Lehman’s workforce of 25,000; on the other hand, market’s hate uncertainty, and maybe this just helps ensure that New York market is on target to meet Jim Cramer’s projected turnaround date of June 30, 2009.
Two Major Wall Street Banks Falter [NY Times]
Crisis on Wall Street [WSJ]
Photo by huachen
Actually—lovely sentiments there. Who doesn’t purchase something like a home without any thought to its future value? Very few I would think. And yet I think you overstate the importance people place on this. A home is still a home–unlike other “investments” you actually derive benefit from it regardless of its nominal value. You, along with several others on this thread, seem to be enjoying in a particularly acute way, the downturn in the market and the pain, financial and otherwise, that this situation is creating. Why the perverse glee?
“oh really? then why did you seek him out on the forums?”
Because instead of making his predictions on the economy and letting other people editorialize he chose to use his data to attack with a comically broad brush anyone who was interested in buying a house in Brooklyn. Now that he is gone, it is much easier to discuss sensitive topics that require thoughtful responses.
Watching real estate types talk about finance is like watching children talk about foreign policy.
Finance people buy things with bonus, and leverage the shit out of themselves because that is how they generally do business. Hate to break it to you (and them), but there aren’t going to be bonuses this year. That is, if you are not one of the 50-70K that are out of work. Many of the Bear Stearns employees we were offered to stay on for a number of months to “transition” with transition dates ending about now. Those layoffs have yet to hit the numbers. Also, hiring freezes, stepped up performance firings, and other lagging layoffs have yet to hit the numbers, if they ever will.
No more Merrill Lynch MDs (Managing Directors) buying a six pack of condos for his NYU freshman daughter. This is a long way from over. Those that still have jobs in finance will start to think about how long it takes to make a million dollars before they sign on the dotted line for a 2br in bed-sty.
As to the poker aspect of buying and selling homes: this is not the homestead that you made from sod on the wild prairie. Most of the owners on this board bought with investment in mind. The market is going against them and now they want to pretend that is all about their “home.” It can’t be a casino when you are up and a homestead when you are down. I’ll exact as much pain in purchasing on a seller as possible, because they would have done the same to me two years ago. The champagne is warm, the coffee is cold, and the real estate party is over.
wasder –
“Bayridge–second that. “What” a difference it makes!”
oh really? then why did you seek him out on the forums?
“wow, turns out the anti-What is just as annoying and hyperbolic as the What.”
At least What was funny. What should have been allowed his day in the sun. What difference would it have made to wait one more day.
Legion, the topic is “Wall Street’s effect on the real estate market” and, since that market is taking a huge shit right now, you can most likely expect the sectors of business peripherally or heirarchically related to it to follow suit.
The real estate market (and many other markets too — fine dining, upmarket retail, etc) are based upon “extra money” – luxury spending. Wall Street was providing New Yorkers with much of their “extra money”. When it dries up, so too will the market for $650 bottles of Belvedere and $1m studio apartments..
I think that’s all that’s at issue here..
wow, turns out the anti-What is just as annoying and hyperbolic as the What.
Take a breather silly rabbits the sky is far from falling.
first off; anyone who has spent more than two decades on this planet has seen this pattern before. In fact we have seen it as recently as the late nineties tech bubble.
Huge amounts of politically motivated newspaper ink and sweaty palmed doomsday scenarios will abound. How much is hyperbole and how much is sanity will only be discerned by those with more than half their brain functioning and the capacity to discern historical precedent and facts from the bottom feeding tendencies of schaudenfraude infused rants.
The current failure of these banks and financial institutions is due to overexposure to the risks of poorly conceived mortgage loans. This risk exposure has been amplified by an all too willing liberal media and about 50 million whiny fellow americans looking to see their vision of economic doom finally come to fruition. Everyone who works the market knows that perception is half the battle. Thus, even though 95% of homeowners are paying their mortgages dutifully and mortgage banking makes up a small percentage of our overall economy, the only story you hear is that Wall Street is melting. (nevermind the strengths of the healthcare, tech, commodities, durable goods sectors, etc, etc ) All you will hear is how we are doomed. Especially from the likes of the NYTimes.
so what have we seen in the past?
we have seen major companies fail in good markets and bad. Companies like Drexel Burnham, Pan Am, US Steel.
and yet, curiously enough,we are still here.
how could that be? when judging by the surrounding hysteria of the time, one would have believed it to be the end of times.
and yet, markets recovered.
they recovered after the Depression, after WWII, after the Korean war, after Vietnam, after a decade long 70’s recession, after the 80’s crash, after the tech bubble burst and guess what?
they will recover after this mortgage problem.
companies will fail, others will take up their assets, the government and tax payers will absorb much of it, other companies will thrive, wealth will be created again because that is our capitalist system. like it or not.
hey, you could always move to Putin’s Russia and try your hand at the new totalitarianism, or perhaps Iran and a rabid Theocracy, or maybe Venezuela and a good ol strong man populism (look how well it turned out for Mugabi). How about good old Europe and their pseudo socialism, just don’t mind the growing resentment towards foreigners and the huge amounts of young men without employment.
perhaps Brownstoner should have let the local assclown post today and have his moment of bliss. but then again, all that silly ranting would only distract folks from a real opportunity to witness the ups and downs of our system in a way that may actually educate some for the future.
yawn, wake me when there is a real problem on the horizon, like a black hole accidently being created at the Hadron collider.
Any advice for someone who owns a co-op in Manhattan and wants to sell it and buy another in Brooklyn? (or more likely a condo)? Should we sell now and wait for the bottom to put in an offer? Or just sit tight & wait for the whole thing to blow over?