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Three Cents Worth: Do Wall Street Bonuses Affect NYC Sales?

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[This week, real estate appraiser, Curbed graph guru, blogger, and podcaster Jonathan Miller ponders whether Wall Street bonuses affect Manhattan housing prices.]

According to the 5/25 rule, the ratio of New York City jobs in the securities industry and the income they account for is 5 to 25: approximately 5 percent of NYC jobs come from the securities industry and they account for about 1/4 of personal income. With such a large, and disproportionate market share of NYC income, Wall Street has long been considered a lynchpin of the NYC real estate economy and perhaps most strongly aligned with Manhattan.

Still, it is a stretch to associate the ebb and flow as a predictor of future gains and losses in Manhattan housing prices, especially when considering deferred compensation. (Also, many Wall Streeters are getting paid from income deferred from a few years ago when times weren't as good.) But it's fun to chart. Especially after last week's announcement by the State Comptroller of a 15.1 percent increase in both the Wall Street bonus pool and on a per person basis.

By my calculations, Wall Street compensation (adding average salaries to bonuses) is 5.2 times higher than average compensation of the remainder of the NYC private sector ($361 vs. $69k). For more on that, here are some other Wall Street charts I whipped up.

This week I compared 25 years of the Manhattan average sales price to the average Wall Street bonuses (excluded salary because 2013 not yet available) per person over the same period. The pattern of compensation is very similar to price trends and in fact seems to, kind of, sort of, lead apartment prices by about a year.

I don't really place much stock (sorry) in cause and effect for this situation, but I do think basic economic common sense is applicable: when Wall Street compensation is higher, the Manhattan housing market benefits.
· Miller Samuel [official]
· All Three Cents Worth [Curbed]