Lower Wall St bonuses, layoffs to hurt NYC housing

By Julie Haviv and Ilaina Jonas - Analysis

NEW YORK (Reuters) - Plentiful jobs and big bonuses in the financial sector have supported home prices in New York City's richest borough even as other once red-hot property markets have cooled. But with financial markets hitting a rough patch this year, even tony Manhattan could feel some pain.

"Manhattan is the center of the financial sector and it is being particularly hard hit," said Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices.

Wall Street brokers and bankers, especially in the bond and mortgage sectors, are bracing for bonuses that may be flat to about 10 percent lower than last year's record $34 billion.

"People are starting to anticipate lower bonuses and the whole effect on the market," said Shiller. "There is a good chance we will see more of a downtrend in Manhattan home prices over the coming year."

Bonuses affect the sales volume and prices for the entire market by setting the tone of buyer sentiment.

"It primes the pump, so to speak," said Jonathan Miller, director of research at Radar Logic, which tracks U.S. single-family and multifamily home prices.

"A net decline in payouts are very likely to first impact transaction levels," he said. "The number of sales then would temper the rate of appreciation. How much depends on what the bonuses end up being."

Looming layoffs could exacerbate the pain.

Last year, the securities brokerage firms accounted for 177,000 jobs, according to Moody's Economy.com. The overall financial sector accounts for 7.5 percent of Manhattan jobs but 28 percent of the overall income, the research firm said.

Marisa DiNatale, senior economist at Moody's Economy.com expects the financial sector to shed 10,000 jobs across the greater metropolitan area of New York City's five boroughs, northern New Jersey, and three counties north of the city.

"Probably about 70 percent would be in New York City. Most of them would be in Manhattan," she said.

FROM ROBUST TO TEPID

The days of 20 percent annual price hikes and bidding wars for the perfect New York abode look to be over.

Frank Lively, senior vice president of Wafra Investment Advisory Group Real Estate Division, an investment vehicle of the government of Kuwait, said he expects layoffs to have little effect on the priciest apartments but will hit one-bedrooms and studios.

Many new analysts and young traders on Wall Street have fueled demand for the smaller apartments, as have the support staff of the big firms.