[This week, our real estate market analyst Jonathan Miller crosses over into financial markets, plotting the relationship between Wall Street bonuses and Manhattan sales prices. The full rundown below. Click on the image to expand.]
A lot has been made of the Wall Street factor in the New York housing market. Every year the topic gets wide coverage and is considered a leading local real estate indicator. In fact, Curbed dabbled in this topic last December.
Today's announcement by Morgan Stanley that it posted record revenues, consistent with the results of other financial-services firms, would tend to suggest there will be another big payday at the end of the year. Discretionary spending tends to rise when more bonus money is available. Housing, while a basic amenity, falls into that category as people trade up. Wall Street accounts for nearly 5% of New York City employment yet provides about 20% of total personal income.
I went back 20 years and inflation-adjusted the average bonus pay out per securities employee and the average price per square foot of a Manhattan apartment. I tried to do the same thing with the number of sales but there did not appear to be a pattern. In 1986, the average bonus paid out (unadjusted) was $13,950 per employee while today that amount was a record $125,500 per employee. Incidentally, total bonus income in 1986 (unadjusted) was $2.1 billion and was $21.5 billion in 2005.
The appears to be a correlation of pricing and Wall Street bonus income per employee although there are certainly many other variables that come into play. I am certain that even more definitive comparisons can be made with specific property types, but that's for a future chart.
· Manhattan PPSF versus Wall Street Bonuses [Miller Samuel]