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
Lechacal–I hear you. Thanks for the response. It certainly seems like supply has dwindled in the brownstone market at least (as opposed to the condo market). And yes prices do seem to be on their way down, though they have been coming down all year as I see it. So what is your benchmark for when that process is well and truly underway? Also, I see your point about the weakest buyers being forced to sell. I am hopeful that my next ten years will be spent in my new house.
sad but true dittoburg.
they won’t care until gas prices go up and it costs 300 bucks to fill up their ford f350
“Must be nice to live in your own little world”
I think you have it the wrong way around. The majority real-life people really don’t pay attention to the markets, and this news very little to them.
” And I feel for the poor souls at these firms that didn’t make the bad decisions and didn’t get paid millions of dollars to make them.”
I don’t. Their high salaries (receptionists too) compensate for the risks that come with the territory. It’s not like they haven’t been warned for the last 365 days about the possible fate of their sector. I feel more sorry for us taxpayers (Fan/Fred, Stearns, etc.)
Hmm, thanks wasder, just curious. I briefly peeked at the posts yesterday, but didn’t notice anything (more)outrageous.
Hmm, good points, thanks DOW.
Yesterday was one of the few days I was glad to live in Williamsburg – no one had any idea what was going on, let alone what Lehman Brothers and Merrill Lynch were. Must be nice to live in your own little world.
“Are we going down to 10,000 today?”
Naw, just like 1929 (Rockefeller, etc.), the powers that be (President’s Working Group on Financial Markets) have plenty of safety nets in place to manipulate the fundamentals and delay the inevitable. The republicans are still in office and are not going to continue to give Obama the fuel. 2009 might be the year where central bankers “let the chips fall where they may”. But not today and not this year.
Wasder, to address the two sides of the market:
1. Supply has already dwindled. I think there are a lot of natural sellers who are waiting for things to get better. Some of them are actually able to wait out the next 5 or 10 years, but most sellers probably are not. A fairly predictable pattern in any bubble burst is that the top of the market is characterized by decreased supply and decreased transaction volume before prices decline. Then prices start going down, and one by one the weakest sellers have their hands forced and have to sell. Supply increases, volume increases, and prices decrease. There is lots of financial history to back this up.
2. Demand will sharply decrease. Probably already has.’
3. In my view, the combined effect will be as I previously noted.
Sebb, I think what you are trying to say is that so many owners in these areas have the ability to ride out the storm that there will be no selling pressure to drive down prices. I disagree. There is an awful lot of units (particularly in new condos and various recent condo conversions) occupied by relatively recent and highly leveraged buyers. Many of these people rely on the finance industry to make their mortgage payments.
I am not feeling schadenfreude. Some of these recent buyers are my friends. Some of them are going to be devastated, which is heartbreaking to watch. Not that I didn’t loudly voice my opinion that they should wait before buying, but they had many arguments (like you) for why the market was going to be just fine.