The End of the Mighty Manhattan Housing Market

There have been several articles over the past few days talking about how badly New York City will get hit economically by this financial crisis.

Investment banks are going under and thousands of people will lose their jobs. But many will be absorbed by other companies and life will go on.

The real difference now is that with the end of the investment bank as a solo operating entity, like a Lehman or a Merrill, the era of huge bonuses will also probably come to an end.

When has Bank of America ever paid mega-bonuses? Don’t get me wrong. I’m sure they pay very good bonuses. Even stellar bonuses. But they didn’t pay the size bonuses a Lehman or a Merrill was paying.

And it was the bonus that propped up the Manhattan housing market for so many years.

You know- the housing market that the “experts” said could never decline. The housing market that was “immune” to a downturn because there was simply too much money in New York and, of course, “everyone wants to live there”.

Maybe we might find out with this bust- that everyone DOESN’T want to live there after all.

This financial bust isn’t just re-wiring Wall Street, it will re-wire New York’s money culture.

It’s only fitting that this comes at a time when a Russian fertilizer Billionaire is suing the Plaza for his condo deposit because his $50 million penthouse turned out not to be so great after all. He never saw the condo before purchasing it. He bought it completely site unseen.

Those were the excesses of this bubble. And now they’re going away.

I don’t know how long it will take- but normalcy will return to Manhattan’s real estate market. It likely won’t be “cheap” to live there, but at least it can be affordable.

Maybe that will be one of the positive things from this financial crisis. A return to housing sanity.