Wall Street Reorg: Impact on Real Estate?
After a weekend spent huddling together, Wall Street chieftains were unable (or, more precisely, unwilling) to come up with a plan to save faltering Lehman Brothers, which is now expected to file for bankruptcy. Merrill Lynch, which had seen its shares drop along with Lehman’s in recent days, agreed to be acquired by Bank of…
After a weekend spent huddling together, Wall Street chieftains were unable (or, more precisely, unwilling) to come up with a plan to save faltering Lehman Brothers, which is now expected to file for bankruptcy. Merrill Lynch, which had seen its shares drop along with Lehman’s in recent days, agreed to be acquired by Bank of America for close to $50 billion. Meanwhile, questions about giant insurer AIG’s ability to weather its own set of mortgage-related problems continued to mount. My goodness. I’ve been in the business 35 years, and these are the most extraordinary events I’ve ever seen, said Peter G. Peterson, co-founder of the private equity firm the Blackstone Group, who was head of Lehman in the 1970s and a secretary of commerce in the Nixon administration. The big question is whether these moves will increase investor unease or, by removing a few of the major question marks, hasten its recovery. The same can be said for the local real estate market. While many of Merrill’s remaining 60,000 employees will undoubtably be kept on, the same can’t be said for Lehman’s workforce of 25,000; on the other hand, market’s hate uncertainty, and maybe this just helps ensure that New York market is on target to meet Jim Cramer’s projected turnaround date of June 30, 2009.
Two Major Wall Street Banks Falter [NY Times]
Crisis on Wall Street [WSJ]
Photo by huachen
yeah z, I’m up on this. The problem is that we heard this with the JPM takeover of BS, then we heard this with the guvment takeover of FNM et al, and now we hear this with LEH and MER. In the next few days we can hear this with AIG. So three times, potentially four, we’ve heard that this is the bottom, and yet it hasn’t been. Tricky thing, this selling everything, then shorting, then buying at the bottom. When you know what the bottom is, pls let me know 🙂
Dow–How do you see it if not as people’s homes? That sounds cold though I am sure you have a reasonable explanation.
Bayridge–second that. “What” a difference it makes!
114 posts and not one by the ‘What’.
Wasn’t such a bad day after all 🙂
How come there is so many negative comments? would any Home owners put these thoughts out like this? I don’t think so.
“Sounds like a poker match DOW”
Yup. Sometimes life is a poker match. You play the card you’re dealt.
“kinda sad that we’re dealing with peoples’ homes here”
I don’t see it that way.
Sounds like a poker match DOW – kinda sad that we’re dealing with peoples’ homes here.
It’s not just pre-foreclosed sellers that are distressed. Some will protect their credit by all means before it gets to that stage.
The brokers will usually giveaway the distress status of their clients. It’s actually a selling point. I always ask, “why are they selling?”. Whether it’s my business or not will be evident in the answer. The brokers just want to get a deal done and move on.
Also, counter-offers to your low bids can speak volumes. And the more distressed situations are reflected in the conditions of the properties.
Prodigal Son, I’ve been bearish for quite some time and work on Wall St, so my advice has it’s own bias. But the old adage on trading desks is when everyone is buying it’s time to sell and vice versa. When every single person you know is telling you it would be insanity to buy (or are short-selling), you’ve probably found the bottom of the market. Unfortunately if Great Aunt Sara has caught up with the financial news and *knows* the market is hopeless, the tide has already started turning. Put it this way, I’ve got a nice chunk of cash saved as well, and I’m looking forward to buying a house in the next year or two and am happy to scoop up something cheap.
Also, I’m not quite as bearish on NYC real estate market as most, largely because I think unless crime starts going crazy again, we won’t see a return to the early 90s/late 80s housing climate again. There is a different sort of “national” pride in the city now than there was before, partially still a post-9/11 thing, and partially because there really just aren’t that many thriving cities in the country right now, so young people will continue to flock here. High gas prices and low real estate taxes also help NYC vs suburbs (for example), and everyone at the end of the day needs a place to live. Also, while some of NYC properties are speculatively bought and sold, a lot of people here genuinely still have the cash needed to buy at the current prices. Where they get this money from I really have no idea but I can’t pretend it doesn’t exist. An older house-painter gentlemen is buying a studio unit in my co-op for cash. Managed to save twice his annual gross income in cash, no mortgage necessary. Not all of Brooklyn is financially out of reach, and certainly not to those who are prudent with their money (regardless of their income). The fact that lending standards have been always been stricter in NYC due to the prevalence of co-ops stabilizes our housing somewhat as well.
Is there any way to find out who these “distressed sellers” are besides becoming chummy with brokers? Once a home goes into foreclosure, isn’t a large amount of cash needed to purchase it?