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Three Cents Worth: Bonus Spending Power Cut

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[This week, Curbed graph guru Jonathan Miller tackles the bonus bounce, or sudden lack thereof.]

Although we are all tired of the topic of Wall Street bonuses, I thought I would look at them in the context of an absorption rate. In the fourth quarter of 2008, the absorption rate was 11.9 months (excluding shadow inventory). I define absorption in this context as the number of months it would take to sell all available apartments at the current rate of sales.

I wanted to see how many Manhattan apartments the bonus pool could theoretically acquire alongside the change in the number of sales. There were record or near-record bonuses from 2005 to 2007. (This also correlates with the peak of exotic mortgage lending from 2004 to 2007, which is also the period when the Fed was raising short term rates driving down affordability.)

The gray columns represent Bonus Spending Power, or the annual total bonus pool divided by the median sales price of Manhattan apartments at that time.

The Bonus Spending Pool shows a nearly 50% drop in purchasing power from Wall Street in 2008 as compared to 2007. At the same time the drop in the number of sales was significant and we are seeing more of the same right now.

· % Change in Number of Sales v. Bonus Spending Power [Miller Samuel]
· Previous Three Cents Worth [Curbed]