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Bonuses Loom For Wall St And NYC Residential Markets

NEW YORK (Dow Jones)--The Fairchild condominium project opened for sale in December of 2008, just after Lehman Brothers' collapse rippled across the financial sector and paralyzed the Big Apple's real estate market. "We couldn't have picked a worse time to open," jokes Gerard Longo, principal of Atlantic Walk Vestry, which developed the 21 units in North Tribeca. Months passed with minimal activity. Prices saw double-digit slashings. But these days, Mr. Longo is upbeat, cheered by the return of shoppers looking to spend their Wall Street bonuses. "We've certainly seen an uptick," he says. "They're more aggressively looking and now we're starting to see the offers come in." While public outrage looms over Wall Street's 2009 bonuses-- potentially record payouts are expected in coming weeks--New York's real estate community is outright giddy. Local brokers say the money will help stabilize the nation's quirkiest sales market by boosting sales--particularly in the $2 million to $5 million range--and restoring confidence. While it is early, there are indications of a pickup. Brokers say visits to their Web sites are spiking, and traffic is up at open houses. To prepare, some agents are even re-hiring assistants laid off during the downturn. Marketing is being ramped up, though it is more subdued than the boom's lavish parties. Name-brand singers and caviar are out, replaced by panels discussing market conditions and direct mail to financial employees. Still, caution continues. Credit remains tough to secure, particularly at higher price points. While inventory has fallen since peaking in mid-May, it could climb again should would-be sellers flood an improving market with new listings. Some sellers, meanwhile, are declining purchase offers--holding out for higher offers from bonus recipients--leaving sellers at risk should a flurry of deals not materialize. Indeed, how the bonuses will be paid remains unclear--thought it's unlikely to be the cash bonanza of past years. Some payments could come via stock, limiting buyers' purchasing power. Plus, there's no guarantee bonus recipients will pour their money into real estate. Many would-be buyers remain unconvinced that the worst real-estate downturn in decades is over, and luxury units can be rented for below a monthly mortgage payment. "I wouldn't assume that these large bonuses are going directly back into real estate. That was an assumption that was made in a previous era," said Sofia Song, vice president of research for real-estate Web site StreetEasy.com. "This is a new economy and people are thinking differently and valuing things differently." That is a big shift for the Big Apple: Wall Street has long been a big sales driver, as freshly-paid bankers and hedgies went on a shopping spree where price tags didn't matter. But that changed following Lehman's failure in September of 2008. As thousands of high-paying jobs disappeared--a drag on last year's bonus season--the market softened. Such conditions took a toll on the market's sky-high prices. Since peaking in the third quarter of 2008, co-ops prices have fallen 13%, to a median $622,250, while condos, which peaked the next quarter, have plunged 22% to a median $1.033 million, according to a fourth-quarter report by The Corcoran Group and ProperyShark.com. As with many markets nationwide, falling prices sparked activity. Fourth-quarter closings soared nearly 50% from a year earlier. But much of that activity came in under $1 million-- considered Manhattan's lower end. Now, brokers report increased interest in pricier units, as well as the new product planned during the heyday--and delivered during the downturn--but now ready for quick sales. Last week, a "big bank" employee inked a contract in the $6-million range for a four-bedroom unit, said Jacky Teplitzky, managing director with Prudential Douglas Elliman. At PS90, a Harlem elementary school converted into condos, a financial employee is expected to sign a contract for a two-bedroom penthouse by Friday. Brokers report that this year's bonus crowd is skipping the flashiness. Prospective buyers aren't being over-indulgent and they're not bragging about expected payouts. Pamela Liebman, Corcoran's chief executive, said "In the go-go days, they would stretch to buy the biggest, most luxurious apartment they could find. Now, we have this era of hush-hush conservatism."



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