Bonus season is a pivotal time for many across the country, often marked on calendars with anticipation. Year-end bonuses, usually distributed in the first few months of the new year, traditionally bring substantial windfalls to Americans in industries that abide by this compensation model, including but not limited to banks, financial enterprises, and law firms. However, recent market conditions have impacted this system, and experts predict a significant decline in bonuses this year. Many are wondering how stagnant bonuses might impact the real estate market.
In a metropolis such as New York City, where Wall Street bonuses provide a significant portion of the population with major windfalls, there is growing concern among industry insiders about potential repercussions. According to Seth Levin, a licensed real estate salesperson for Keller Williams NYC, “Many experts predict that finance industry bonuses will be down somewhere between 10% and 25% this season, depending on who they work for and what area they are working. Wall Street and the finance sector are essential and hugely impactful NYC real estate market feeders.”
There is a substantial correlation between buyers having disposable income and increased spending in the real estate market, particularly in the luxury segment, which relies heavily on Wall Street buyers. However, many believe that the spring market will remain highly active.
“Since interest rates shot up in 2022, many would-be buyers chose to hold off and ride out some of the uncertainty and the higher cost of money. They had a good run while spectating, and that group is now sitting on a lot of liquidity,” notes Levin. “With interest rates decreasing and some of the prevailing uncertainty mitigated, this year’s lower bonuses will likely have a lesser impact than in a regular market.”
Other experts agree with Levin. Despite decreasing or stagnant bonuses, the New York market seems poised for a bullish new year.
“I believe we won’t have much of a negative impact for the 2024 real estate market. High-income earners or cash rich consumers have been on the sidelines watching the real estate market go up and down for the past year weighing when’s the right time to jump back in while their savings have been sitting in HYS earning over five percent interest in most cases,” says Lucy Wu, a licensed real estate salesperson for BOND New York. “Whatever the bonus payout may be for consumers earning bonuses, they’re going to combine that bonus and the savings they held onto over the year to pull the trigger on a property in 2024.”
While the general outlook remains optimistic for the New York City real estate market, there is some concern that reduced bonuses could slightly affect the luxury segment. The prosperity of the city’s upper class, linked to Wall Street and financial institutions issuing large bonuses, might result in a modest decline in luxury market sales volume.
“When Wall Street bonuses are low, there are not as many buyers in the market. The younger generation on Wall Strett who may be renting and waiting for their bonus to purchase their first home may wait another year if they don’t receive the bonus they expected, so they can purchase the property they really want,” explains Nicole Gary, a licensed real estate salesperson for Keller Williams NYC specializing in the luxury market. “This, coupled with higher interest rates, may have an effect on our real estate market.”
