All Eyes on Earnings as Housing Predictor

It’s no secret that a large contributing factor to the strong Manhattan real estate market has been Wall Street’s success.  So it’s no surprise that we are eagerly awaiting earnings reports this week from the major Wall Street brokerages to give us some sense of how bonuses will affect the Manhattan real estate market this Winter.  So Lehman announced a 3.2% decline in earnings this morning which topped expectations (via Wall Street Journal):

Lehman Brothers Holdings Inc. reported a 3.2% drop in fiscal third-quarter net income as more than half of the firm’s revenue came from overseas, kicking off an intensely anticipated earnings season for brokerage firms navigating turbulent mortgage and credit markets.

The results calmed some investors’ nerves, sending the stock higher in premarket trading to $61.60 from Monday’s closing price of $58.62.

For the quarter ended Aug. 31, the investment bank reported net income of $887 million, or $1.54 a share, compared with $916 million, or $1.57 a share, a year earlier. The results show how quickly the markets have turned for brokerage firms. In its fiscal second quarter, Lehman booked record quarterly net income of $1.27 billion.

This is significant as Lehman is one of the Street’s biggest underwriters of mortgage backed securities.  Expectations of low bonuses remain however and rumors of major layoffs are permeating the industry.

Last year we saw a significant increase in activity in the housing market in mid October after most Wall Street bonuses were initially reported.  It took no time at all for Wall Streeters to begin shopping with that anticipated bonus money.  This year is likely to be quite different and it will be interesting to see how the local housing market weathers a weak bonus season.  One saving grace for our local housing market is the still weak dollar but can that alone keep our market buoyed? 

If you haven’t checked it out already, you must read New York Magazine’s piece on Best and Worst Case Scenarios for the Manhattan Real Estate Market. 

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