This article in the NY Times moves me to tears.
Wall Street bankers can no longer get home loans using their as yet unreceived year end bonuses to qualify for a mortgage. The folks who played a large part in the housing debacle are actually paying a price for it now.
ALMOST overnight, investment bankers and others on Wall Street have gone from being Manhattan’s most aggressive apartment buyers to real estate pariahs.
As financial services companies continue to cut jobs and bleed billions of dollars, their employees have far less cash to spend on high-priced apartments, and very little optimism about taking a risk right now anyway.
Those in the financial industry who still want to buy real estate are often unable to persuade lenders and co-op boards to work with them.
The biggest problem is that buyers who work on Wall Street no longer have the guarantee of huge bonuses to bolster their financial status. And even those who continue to get bonuses are finding that banks and co-ops will not let them count all that money as part of their income, because unlike a salary, it can fluctuate wildly.
And the hard times will last for months:
The bonus situation is expected to get worse before it gets better. Alan Johnson, the managing director of Johnson Associates, a company that tracks compensation data, said that Wall Street bonuses are projected to be 30 to 40 percent lower in 2008 than in 2007. “It’s going to be the toughest year in at least five years,” he said.
He predicts that bonuses will not pick up until 2010.
I especially loved this part:
The problems facing buyers from Wall Street won’t necessarily cause Manhattan apartment prices to slide drastically, said Diane M. Ramirez, the president of Halstead Property, though they could result in slightly less competition for properties and prompt more sellers to negotiate.
Yeah, you bet. "Workers in financial services-related businesses make up roughly 25 to 30 percent of Manhattan buyers, according to estimates by Halstead Property" and prices won't suffer. Supply and demand doesn't apply to Manhattan, I guess. This time it's different.
Please help me pass these folks a petard. No one deserves it more.