Real estate is a local business driven by local market conditions and bought and sold (mostly) by local people.
How about a market that is fueled by an industry that has experienced steady wage/earnings growth since 2003 and is about to have its best year in ten years? That would be the securities industry and that industry is headquartered in New York City.
This article, published today in the Wall Street Journal, highlights that investment bankers, traders, and brokers have experienced a boom this year. They're about to be rewarded in early 2007 with HUGE bonuses! Where do you think those bonuses will go? Art? Maybe. Fancy Cars? Well, maybe but parking is so tough it seems almost silly to buy a Bentley in NYC. Exotic Travel? Maybe, but it's hard to believe that the investment bankers will spend a month or two in Fiji when the market is heating up. You gotta make hay when the sun shines.
I think you're going to see those huge Wall Street bonuses funnel into Manhattan real estate.
This article, in the New York Times, outlines the compensation structure for various securities industry positions. Most notable was the fact that although the securities industry accounted for only 4% of the labor force in NYC, their compensation accounted for 20% of the aggregate compensation. And it's going up! The average Managing Director is getting a bump from $1.2 million to $1.5 million. First year B-school grads are getting close to $300K on Wall Street.
New York real estate has sagged a bit this past year like the rest of the country. These bankers and traders are professional opportunity seekers. Give an opportunity seeker some extra cash and a soft market and you have the makings of a pretty nice seller's market.
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Hi Brian,
Thanks for commenting on my post about disintermediation yesterday... my comment will zigzag from my background to why NYC and SF benefit from a "strong" economy to why the rest of the nation feels left out (according to today's election news). Thx for bearing with me...
I used to work on Wall Street in the 90's - and lilved in Manhattan during the go-go 80's until 10/19 happened... (nowadays, no one knows what that day is...). My AR post today talks about the demise of the bond traders.
I now live in SF and the increasing wealth benefits financial centers and high-demand cities like ours. Unfortunately, the rest of America doesn't feel the effects of a strong economy that seems concentrated on the two coasts. The Republicans thought the economy was their ace in the hole with today's elections and the midwest states who don't feel rich are voting with their pocketbooks.