Leftovers Market Starting To See Some New Listings
A: After going on appointments with six different clients over the past few weeks, the general consensus from these buyers are, 'I'm tired of leftovers, where is all the new stuff'? Funny when I don't say anything to clients as I focus on my business but observe similar statements from different buyers that don't know each other. My response would probably be, yes I can see the market the past 3-4 weeks as being one of slim pickings, or leftovers if you prefer, but be patient because new listings will be coming!
Every year in December we see the usual surge in listings removed from the marketplace for seasonal reasons. This time around saw the very same trend. My new data source shows around 1,100 existing listings or so removed from the marketplace in December alone - again, nothing abnormal here. Here's the rub: Active inventory was around 8,950 or so at the end of November and is lingering around 7,205 units right now. Factor in the 1,100+ listings removed over this time period and you see about 650-700 contracts that were signed and now off the market as well.
That pace of contracts signed is lower than prior months but fairly strong considering the usually slow month of December; with the holidays and all the lost time attorneys had a smaller window to get deals signed. Since, this pace has ticked up again as we got into the first few weeks of 2010. The continuation of deals being signed and listings removed for seasonal reasons brought inventory to the lower levels that we see today. I see Streeteasy.com shows about 3,163 listings IN CONTRACT right now for all of Manhattan (I have pending sales higher around the 4,224 level) - think about this pipeline of pending deals that will close in Q1; Ill discuss this in another post! This is why buyers feel that only the 'leftovers' remain after seeing more desirable properties get signed into contract over the past 2-5 months.
But not to fear, I already am starting to see new listings tick up and colleagues I talk to are telling me that they are going on multiple sales pitches that are expected to sign listing agreements shortly! This is about the time when I would advise new sellers to come to market or re-list after a brief time off if the property didn't sell before. As usual, pricing is the most important! With traffic levels solid and ready, willing and able buyers out there, new sellers should take advantage of the action while its here and resist the urge to price high and test the market. That strategy will only help your competition to sell faster and before yours! For the record, I see this market remaining active for another few months before slowing down again from market forces discussed in earlier articles (higher rates, higher taxes, carry trade unwind, wearing off of artificial stimulus/fed MBS purchases/tax credits, rising delinquencies, reversal of off balance sheet accounting/M2M rules, etc..)
As for buyers, if they are not frustrated by the slim pickings of quality property that is priced right then they are focusing on listings that have been on the market for 6+ months yet had not sold. The thinking here is to find sellers that missed the action because they were priced wrong and too high, but who now 'get it' and started to more aggressively lower their asking price. Perhaps those sellers are now tired of the selling process and ready to get it over with.
As for wall street bonuses, as I said in my October piece "Euphoria or Reality Over Upcoming Bonuses?":
What I don't hear are terms like: distribution of cash component vs stock options, deferred stock compensation, clawbacks, ROE shares deferred, toxic asset bonus fund (credit suisse in 2008), other government tax policy on future bonuses, etc..Those with guaranteed cash bonuses in their employment contracts, good for you but you are in the minority. The bonus season this year will be one of LESS CASH! Whether that means a lower cash component, deferred stock compensation, ROE shares deferred, future clawbacks, etc., we are yet to see and time will tell. One thing I can say is that for both co-ops and for lenders, bonuses are not treated the same way they used to be and provide for significantly less purchasing power than in years past!
In addition, you must keep in mind that this also could affect existing homeowners who counted on that cash bonus to maintain a certain lifestyle or high end property that was purchased near peak. Again, time will tell.
For now, be patient as I would expect inventory to rise the next few months as sellers (both new and re-listers) come back to the market hopefully at asking prices that are in line with where trades seem to be occurring. If I can make one more prediction, get ready for Q1 sales volume to show a surge of perhaps 100% when released in early April and compared to the very weak year earlier Q1 of 2009 - how will the media handle that one when it comes out???
Posted by noidea
Thu Jan 14th, 2010 01:19 PM
I really don't understand how you can say those receiving cash bonuses are in the minority. It simply isn't true. Where are you compiling factual data to even make that statement cause I'm pretty positive no bank is going to tell you what they're really doing. I am also fairly certain hedge funds and private equity gave out CASH.
Posted by Noah
Thu Jan 14th, 2010 01:53 PM
yes you are right nodidea..the majority of wall street is getting ALL CASH bonuses. spot on.
GOLDMAN SACHS
http://www2.goldmansachs.com/our-firm/press/press-releases/current/compensation.html
BOA/MERRILL
http://online.wsj.com/article/SB10001424052748704854904574644822224423560.html
"Under the basic formula likely to be used by Bank of America, about 25% of 2009 bonuses will be paid in cash, with the rest as deferred payments of stock or cash that will vary in value with the company's performance, these people said. Portions of pay for many executives would be subject to clawbacks in the event of future losses.
The 75%-25% stock-cash split is higher than it has been in previous years for Merrill and Bank of America, said a person familiar with the structure. The goal is to discourage the taking of outsize risks that would hurt the company's future performance, this person said.
Some of the deferred stock would be in the form of "phantom units" subject to fluctuations in the bank's share performance and available in increments of cash over a three-year period"
MORGAN STANLEY
http://online.wsj.com/article/SB10001424052748704134104574624680643054584.html
"Morgan Stanley is poised to overhaul the way it pays its most senior executives, deferring more of their compensation over time and benchmarking their pay against rival firms, according to people familiar with the matter.
But the investment bank may stop short of the approach taken by Goldman Sachs Group Inc., which said its top executives would receive only stock for 2009 bonuses. Senior Morgan Stanley executives may receive about one quarter of their 2009 pay in cash, with the rest coming as deferred stock, one of the people familiar with the matter said."
GENERAL WSJ.com ARTICLE
http://online.wsj.com/article/SB126317064618124057.html
" Critics of Wall Street firms are grumbling that this year's bonuses are far too generous. But some recipients are none too happy, either: They're complaining too much of the payout is coming in stock instead of cash.
Banks and securities firms have told workers their bonuses will contain a bigger percentage of stock to demonstrate that Wall Street is sensitive to public anger over the big paychecks. The idea is that stock reduces employees' temptation to take too many financial risks, since they have an ownership stake."
ANOTHER
http://blogs.wsj.com/deals/2010/01/11/is-wall-street-caving-on-bonuses/
"In addition, Goldman Sachs, J.P, Morgan, Citigroup, Morgan Stanley and Bank or America all are likely to give out significantly more stock than cash in 2009 compensation. At Goldman, the stock component could jump by 20%. Some Bank of America executives could get 75% of their compensation in deferred stock. Morgan Stanley told some employees that 50% of their compensation will be shares tied to performance.
Smaller cash components and more stock tied to long -term performance — it sounds exactly what critics have been arguing for."
AND ANOTHER
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/11/AR2010011102010.html?nav=rss_business
"Overall, Wall Street executives are preparing to take home packages made up of more stock-based awards and less cash. More senior executives could see the stock portion of their bonuses rise as much as 20 percent, while rank-and-file employees could receive about 10 percent more in company shares, according to one executive at a large bank. Goldman is compensating its top 30 executives entirely with stock.
Bank of America and Citigroup, which received heavy taxpayer assistance, have instituted clawback provisions for bonuses to senior executives; these aim to reward long-term performance and rein in the reckless behavior that regulators have blamed for playing a role in the financial meltdown. Morgan Stanley, which also has such a provision, is planning to tie 25 percent of deferred pay for about 25 top executives to specific performance metrics, according to a person familiar with the bank's plans. At least 65 percent of their pay will be deferred. Bank of America is planning to have a larger portion of its bonuses deferred and tied to the performance of its stock price. "
Yea, nothing to back it up! Gimme a break and wake up. I never said bonuses are down, they are not, this years compensation will be huge, but it will be of the LESS CASH variety - that does not mean NO CASH, it means LESS CASH. Why don't you support your comment that most of the bonuses will be paid out 100%, as in ALL CASH bonuses. Ill be waiting to see your supporting publications.
Posted by Noah
Thu Jan 14th, 2010 02:54 PM
lets further clarify a few things...because when we talk about these bonuses, most think of the big bucks and that is really the ones that will see the LESS CASH this go around.
First a few things to clarify:
1. bonuses are taxed as ordinary income..under $1M and I believe 25% is withheld, over $1M and I believe 35% is withheld
There is now talk of a 50% tax on bonuses, but that is just talk for now.
2. Most bonuses for the masses are NOT huge. Cash component of bonuses will be capped at a few hundred K, not sure of exact # (anyone know?). I know its $500K for execs...However, most bonus recipients will be under that cap, so yes, I can see those being paid in cash and taxed as ordinary income - assuming the tax part doesnt change for the masses under $1m here.
3. Average base salaries of entry level VPs/Associates is around $100-$150K range - average base for managing directors can be around the $200-$225K level - its the bonus that is counted on to drive real estate sales and its the higher end that counts on the big money to be put to work!
4. A small % of bonus recipients will be getting stock because only a small percentage make bonuses in excess of the cash cap. However this might be more than half of the pool in dollar terms.
For example, Top x% will get 85%-90% of the set aside bonus pool. Not sure what that x% number is though...These are the guys that usually drive the mid-higher end in Manhattan with their big bonus payouts. It is these guys that will see the LESS CASH / MORE STOCK component.
Now, I no longer am on the street trading but have many friends and clients that I keep in touch with. So, if this info seems off or flat out wrong, please do tell me and explain where I am wrong on this. And again, when we talk of the wall street bonus season driving Manhattan real estate, usually we are talking the guys that get the $500K+ bonuses that will be used as down payments to go towards higher end purchases - it is those that for the most part I talk about getting a less cash component. Not sure how the guy making $125K/yr and getting an all cash bonus of $150K will start driving the $2M+ market in this city...sure its a great bonus and I never diss the money one is making, but in this city we are talking about the bigger pockets driving the mid-higher end and above properties.
Posted by anon
Fri Jan 15th, 2010 07:18 AM
it seems Noah has some idea because take a look at this Citigroup headline today
Citi reportedly plans to limit cash bonuses
Citigroup /quotes/comstock/13*!c/quotes/nls/c (C 3.46, -0.05, -1.43%) will cap cash bonuses for bankers at below $100,000 the Financial Times reported Friday, citing people close to the situation. The move is aimed at defusing the public backlash over the level of Wall Street pay, the newspaper reported. The bank's overall bonus pool for 2009 will also be roughly in line with 2008, which was a relatively low level compared to other years, the report added. Like other banks, a large portion of bonuses at Citi will be in the form of stock that couldn't be sold for a number of years, with any cash element limited to less than $100,000, the FT said.
http://www.marketwatch.com/story/citi-reportedly-plans-to-limit-cash-bonuses-2010-01-15
Posted by Noah
Fri Jan 15th, 2010 07:53 AM
exactly anon! Was just browsing NYTimes and saw it there too
http://dealbook.blogs.nytimes.com/2010/01/15/citi-said-to-cap-cash-bonuses-at-100000/
Citi Said to Cap Cash Bonuses at $100,000 --- As I pointed out in 3rd comment, I would think majority of the bonuses will be at or below the cash cap. Those above the cap, will see less cash portions and more deferred stock forms of compensation.
Ofcourse, noidea is right about the HF world. But that is always the case with the unregulated hedgies...so Im not using that because it stays constant. Rather, the topic was about the big firms and how when we discuss a wall street bonus season here in Manhattan, its really the bigger money and higher end sales most brokers refer to as a driving force worth watching.
Posted by noidea
Fri Jan 15th, 2010 08:05 AM
You're all completely clueless. PROPAGANDA. There is no way they will tell you nor will you know. There is alot of cash being given out - cover of WSJ today. Sorry Noah - but you really do not have any idea.
Posted by Noah
Fri Jan 15th, 2010 08:36 AM
ok - ill take your word for it and since all bonuses are being paid in cash, and these headlines and bank announcements are propaganda as you say to quell public outrage, I look forward to many big deals in the coming months. the no idea will translate to big bucks for me. so bring it on.
Posted by Fred
Fri Jan 15th, 2010 08:40 AM
Noah is right. It's the MDs and higher who matter because that's the group that buys in the $2mm+ range, especially the $3mm to $5mm, which is teetering on another leg down. JPM issued some very cautious statements this AM, despite great results. It makes all the sense in the world that bonus recipients operate under the same mentality; finservices has a long way to go to regain the same level of pre-crisis confidence.
Posted by anonymous
Fri Jan 15th, 2010 09:18 AM
noidea,
These big banks are all publicly reporting. If they issue an announcement and do otherwise, it will show up in the financial statements, and there are plenty of politicians, etc. watching their every move. Why would you assume that they would issue such a statement only as propaganda? Maybe there will be a few special exceptions that no one will hear about, but a complete deviation would not go unnoticed.
Posted by Ben
Fri Jan 15th, 2010 10:06 AM
Noah said that those with "guaranteed" cash bonuses are in the minority. Cash bonuses are a big part of Wall Street comp. Cash bonuses are getting smaller. Does someone have a good idea of how many employment contracts “guarantee” a certain percentage of base? Revenues generated? Profits generated? I thought all those decisions are made at the end of the year based on performance. Why would a big bank guarantee this except for its very high level superstars? Moreover, why would a bank want to guarantee it in 2011, 12 and 13 without knowing the new regulations, monetary, and fiscal policies.
Ben
Posted by jason
Sat Jan 16th, 2010 04:13 PM
every single listing in chelsea is ANCIENT.
Posted by Mitch
Mon Jan 18th, 2010 12:43 PM
Two additional issues to consider for hedge fund managers. First, Fund managers usu get (i) a management fee of 2% per year, which does little more than pay overhead, back office and limited manager salaries, usu. less than $1 million per year, plus (ii) "carried interest" equal to 20% of the profits of the fund which is the part that pays for the netjet memberships and Plaza condos. While lots of funds performed well in 2009 (especially the last six months) nearly all funds are subject to a "high water mark" that eliminates carried interest until a fund makes up for prior period losses. For example, a fund with assets worth $1 billion in Jan. 2008 that fell in value to $700 million by Dec. 2008 had to make $300 million in 2009 (on assets worth $700 million, remember, so a 43% return) before managers get to participate in any carried interest, which is where all the real money is at a hedge fund. So even if you hear that hedge fund x shot the lights out in 2009, that doesn't necessarily translate into huge comp for its managers, cause they probably had a lot of ground to make up before getting any carry.
Second, hedge fund managers do not necessarily collect the carry in all cash. Many funds require managers to keep a large portion of their own wealth invested in the fund, and even those that don't usually have lots of management cash invested. If you know any hedge fund guys, ask them how liquid their shares/LP interests are these days (and if they say their own interests are highly liquid, they need to talk to a lawyer).
For these and other reasons, I doubt that "hedge fund bonuses" (kind of a misnomer really) will much change the complexion of finance comp this year or drive the high end real estate market.
Posted by Mitch
Mon Jan 18th, 2010 12:44 PM
Two additional issues to consider for hedge fund managers. First, Fund managers usu get (i) a management fee of 2% per year, which does little more than pay overhead, back office and limited manager salaries, usu. less than $1 million per year, plus (ii) "carried interest" equal to 20% of the profits of the fund which is the part that pays for the netjet memberships and Plaza condos. While lots of funds performed well in 2009 (especially the last six months) nearly all funds are subject to a "high water mark" that eliminates carried interest until a fund makes up for prior period losses. For example, a fund with assets worth $1 billion in Jan. 2008 that fell in value to $700 million by Dec. 2008 had to make $300 million in 2009 (on assets worth $700 million, remember, so a 43% return) before managers get to participate in any carried interest, which is where all the real money is at a hedge fund. So even if you hear that hedge fund x shot the lights out in 2009, that doesn't necessarily translate into huge comp for its managers, cause they probably had a lot of ground to make up before getting any carry.
Second, hedge fund managers do not necessarily collect the carry in all cash. Many funds require managers to keep a large portion of their own wealth invested in the fund, and even those that don't usually have lots of management cash invested. If you know any hedge fund guys, ask them how liquid their shares/LP interests are these days (and if they say their own interests are highly liquid, they need to talk to a lawyer).
For these and other reasons, I doubt that "hedge fund bonuses" (kind of a misnomer really) will much change the complexion of finance comp this year or drive the high end real estate market.
Posted by Mitch
Mon Jan 18th, 2010 12:45 PM
Two additional issues to consider for hedge fund managers. First, Fund managers usu get (i) a management fee of 2% per year, which does little more than pay overhead, back office and limited manager salaries, usu. less than $1 million per year, plus (ii) "carried interest" equal to 20% of the profits of the fund which is the part that pays for the netjet memberships and Plaza condos. While lots of funds performed well in 2009 (especially the last six months) nearly all funds are subject to a "high water mark" that eliminates carried interest until a fund makes up for prior period losses. For example, a fund with assets worth $1 billion in Jan. 2008 that fell in value to $700 million by Dec. 2008 had to make $300 million in 2009 (on assets worth $700 million, remember, so a 43% return) before managers get to participate in any carried interest, which is where all the real money is at a hedge fund. So even if you hear that hedge fund x shot the lights out in 2009, that doesn't necessarily translate into huge comp for its managers, cause they probably had a lot of ground to make up before getting any carry.
Second, hedge fund managers do not necessarily collect the carry in all cash. Many funds require managers to keep a large portion of their own wealth invested in the fund, and even those that don't usually have lots of management cash invested. If you know any hedge fund guys, ask them how liquid their shares/LP interests are these days (and if they say their own interests are highly liquid, they need to talk to a lawyer).
For these and other reasons, I doubt that "hedge fund bonuses" (kind of a misnomer really) will much change the complexion of finance comp this year or drive the high end real estate market.