Despite the biggest Wall Street bonuses since the Great Recession, Manhattan recorded a 15% drop in luxury home buying in the first quarter of 2018, according to data on luxury contracts, a disparity that highlights the diminishing weight of bonus season on the city’s housing market.
Wall Street bankers and traders just pocketed their biggest bonuses since 2006, with the average payout equaling $184,220, the New York State comptroller announced Tuesday. But Manhattan’s property brokers are still waiting to see those big paydays spill over in the form of home sales.
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Buyers signed contracts for 282 homes priced over $4 million in Manhattan between January and March compared to 330 last year—marking a 15% drop in luxury activity, according to data culled by Olshan Realty.
Bad weather in March may have offset some bonus-driven property buying in the luxury sector, noted Donna Olshan, president of Olshan Realty and author of the weekly Olshan Report.
"Four business days were chewed out by Nor'easters in March," Ms. Olshan said.
Sudden volatility in the stock market beginning in February may also have securities industry employees feeling a little tight-fisted, said Frances Katzen lead agent of Douglas Elliman’s Katzen Team.
The S&P 500 Financials index dropped more than 9% from Feb. 1 through closing bell Wednesday.
"We are not seeing the same impact that we’ve seen in prior years," Ms. Katzen said. "A few are looking at investment properties, one-bedrooms, to park some money in and rent out. But for the most part, I’m not seeing the cross pollination."
Her finance industry clients are also turned off by softened luxury prices, preferring not to upgrade if it means selling their current home for less than they think it’s worth, she said.
"It’s not a seller’s market," she said.
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The absence of a bonus bump to the housing market may have more to do with the banking industry than the local real estate market, said Jonathan Miller, president of appraisal firm Miller Samuel and author of New York City market reports.
"They always find a story about a guy who ran out and bought a Maserati with his bonus, but that’s on the margin," Mr. Miller said. "On the ground, not many talk about the bonuses anymore."
Post-crisis regulations on Wall Street, including Dodd-Frank, have put more emphasis on salary than bonuses, meaning most of the rank-and-file bankers and traders made far less than the comptroller’s average of $184,000. Most of the $25.4 billion paid this season in bonuses went to the highest echelons of the industry in the form of deferred payments and stock with a vesting period—illiquid compensation that can’t be used today to snap up a new condo.
"It’s not like an off to the races sort of thing during bonus season," Mr. Miller said.
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Brooklyn’s Bonus Bump
Anecdotally, brokers said there may be some exception in the Brooklyn market, which over the past five years has seen a growing cohort of finance workers looking for first homes, said Gina Castellano, Brooklyn manager for Stribling.
"Brooklyn Heights is one stop away from Wall Street on the subway," Ms. Castellano said, adding that developments in downtown Brooklyn are also seeing activity from bankers and traders.
Brooklyn contracts over $2 million were up 8% in the first quarter compared to a year ago, according to market-wide numbers compiled by Stribling.
"It also seems that we have had an uptick in couples working in finance looking to purchase their first home," Ms. Castellano said
If two people made the average bonus this season, that’s enough to pick up a $1 million to $2 million condo.
"$400,000 is a nice downpayment," Ms. Castellano said.