Since the real estate market here has strong correlation to Wall Street employment, I should point out the following events today.
Lehman Brothers is in flux on its future prospects (as of 4:30 PM).
But due to Lehman's challenges, Merrill Lynch and Bank of America are reported to be in merger talks now.
This is a pink slip scenario of the worst kind - especially if Lehman should file for bankruptcy. This is not inevitable but the risk has grown over this weekend's failed talks, so far.
Meanwhile any consolidation from a Merrill and BofA merger would add more pressure to an already weakening situation.
Mortgage rates will definitely go lower as bonds rally, but the fate of real estate pricing will now drag deeper and longer.
For those optimists yearning for Hudson River views, declaring an inevitable comeback in price per sq ft? No way!
$500/sq ft is going to be the new norm. The bubble pricing near $1,000/sq ft needs to be left in the realm of Manhattan property. The two will diverge in desire even more now that Manhattanites will suffer a deeper risk than they had even envisioned.
Affordability is no longer about interest rates and this adjustment in credit conditions only intensifies my previous arguments.
Stay tuned to your business channel. Monday has lots in store for all in these trying times.
P.S. I believe I can now shed my unfair label of "Doomer" and correctly claim my right as RE.ality.
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10,000 jobs in New York are impacted by Lehman's bankruptcy - 25,000 worldwide. Merrill Lynch and Bank of America have already pre-announced a layoff plan from their merger. No details yet, but those personnel will be impacted shortly since the merger is expected to close by Q1 2009. Looks like the holiday shopping season will take another rain check this year.
- "Housing market bottoming soon."
- "Pessimists say the same gloomy things every year!"
- "Record low interest rates make homes more affordable than ever!"
- "Real estate will always appreciate!"
I had to throw that last one in because it truly represents the trained mindset from history.
All the media scares will disappear from the headlines soon but the effects will be around even longer now that employment here has just begun to purge.
My concern now extends from carrying costs on empty units to wear and decay on long standing empty units. New construction is just as vulnerable in that regard, so get your own inspection done even if it's new construction.
Under these conditions, you don't think that there are going to be shortcuts do you? Yeah right!
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