Lehman, BofA, Merril, AIG: What everyone really wants to know is...

...what's going to happen to condo prices in Manhattan?

We've noted elsewhere that New York city real estate has managed hold up reasonably well while Rome burns, though 2009 is looking a bit smoky for condos in the financial services capital of the world. On the horizon watch the three confluential variables:

1. The layoffs be a-comin'
2. Bonuses are heading down for those who remain
3. The dollar is strengthening

Here's what we know about the Manhattan condo market as of September 12, 2008.

• Year over year, we see condo prices in Manhattan (all zips) basically flat at a median price right around $1.6 million.
• That buys you on average, incidentally, a 1200 square foot, 2 bed, 1 bath place in a 64 year old building. Of course the "average" condo in Manhattan is as elusive as the "average" family in the country. Let me know when you meet one. By the way, we're talking condos specifically here. NYC's bizzarro-world co-op structure is examined in different data.
• They've been on the market, on average, for over four months. My guess is that this number skews higher than it might feel like if you're actually shopping in Manhattan, because, more than anywhere else in the country, the best properties move with behind-the-scenes, my-broker-knows-someone kind of deals.
• [self promotional aside: if you want to dig into all these details yourself, start on our free data for New York, and register. Subscribe to the Condos report for NYC and dive into the parts of town you care about. end promotion]

Where do we go from here?

• Securities Industry employment fell by 11% in the last bubble burst. Bear Sterns, Lehman, Merrill, AIG: they're coming fast and furious this time too.
• It's well known that bonuses drive much of the seasonal demand, on the Street in the
  past couple years a very simple, very common trade has been to short the builders and go long commodities. The evaporated funds behind the long commodities positions alone are going to eat big chunks from the 2008 bonus pool.
• Other things eating at this year's bonuses - M&A is way down, IPOs are non-existent. New product innovation ("Hey," says some underwriter at AIG, "let's insure these sub-prime loans against losses! We can't lose!") is crushed by internal or governmental forces. The liquidity that leveraged it all. Sheesh, I get
  exhausted just listing the down forces.
• International money (particularly Europe and Middle East) has been a prop for New York real estate for over a year now. For some in the world, Manhattan real estate hasn't been this cheap in a long time. Likely a small percentage of over all transactions, these push the margins enough to keep a floor on demand and therefore prices. But now: The last couple months have seen a dramatic turn in the dollar as the European economy weakens also.

Two year chart of the US Dollar versus the Euro.