"The market today is showing a significant reduction in new deals," Hall F. Willkie, president of real estate firm Brown Harris Stevens in New York, said of residential real estate in Manhattan, New York City's richest borough.
Willkie said during the first quarter of 2008, Brown Harris Stevens saw the number of contracts signed in Manhattan fall by 21 percent when compared to the same quarter in 2007.
The firm specializes in high-end properties, which he said continues to garner demand, partly due to foreign interest, but properties outside of this realm are seeing sales drop even more sharply, he said.
"Any real estate market is based on confidence and that is what drives it, so with all the uncertainty on Wall Street that confidence has been shaken," Willkie said.
Time Ripe to Rent
Blake Yaralian, a 28 year old investment banker, wanted what most successful Wall Streeters desire: the perfect apartment in Manhattan. That search, however, came to a screeching halt in early April, as he reacted to a flurry of financial firms announcing job cuts, including his own firm, UBS . Now, his hunt for a one-bedroom midtown Manhattan abode is on hold.
"When things started to get a bit shaky on Wall Street and I saw all the layoff announcements, it definitely made me think twice about spending the majority of the money that I have saved on an apartment," he said.
"While my job looks safe for now, something could always happen in six months where I might not be able to make those monthly mortgage payments," he said. Swiss-based UBS is one of the firms worst hit by the U.S. mortgage market meltdown.
Yaralian's real estate agent at Century 21 NYC, Mary Lou Currier, said she has several Wall Street clients who are in the same boat. "They are all in a wait-and-see mode," she said. "Because they are worried about their jobs, they feel uncertain about taking the plunge right now, whether it be for buying or for selling."
Samuel Pierce, who recently graduated from the University of Pennsylvania's Wharton School of Business, is one of a select few who is about to join Wall Street. On June 30, he will start working for Citigroup , one of the many companies that have announced layoffs in recent months.
While comfortable with the security of his upcoming job, Pierce said overall uneasiness has him leaning towards renting. "I also do not want to put money into an investment that might not retain its value," he said.
Few Wall Street banks have been immune. In addition to Citigroup and UBS, Morgan Stanley and Merrill Lynch have also cut jobs as their exposure to subprime mortgages -- those made to the borrowers with poor credit histories -- becomes apparent.
Some 7,000 analysts, bankers and traders from Bear Stearns lost their jobs when JPMorgan Chase rescued it from collapse. And Lehman Brothers , which has already cut thousands of jobs, is still not out of the woods.
James Brown, a labor market analyst with New York state's labor department, said he expected 36,000 jobs to be lost on Wall Street in the current downturn. For those who keep their jobs, bonuses -- the bulk of their compensation -- will probably be much lower.
"In good times you can count on good bonuses to help you out, but in times such as these, bonuses are somewhat of a question mark," Yaralian said.
Problems Only Just Beginning
The full impact of Wall Street layoffs on the Manhattan real estate market could take a year or possibly longer to work through.
"The Manhattan real estate market is at a turning point," said Jonathan Miller, president and CEO of real estate appraisal firm Miller Samuel Inc. in New York. "What happens from here will largely depend on Wall Street and the state of the overall economy," he said.
The number of homes on the market in Manhattan rose 4.6 percent to 6,194 in the first quarter from the same period last year, according to the Prudential Douglas Elliman Manhattan Market Overview quarterly report released early last month.