A reduction in Wall Street bonuses is having a far-reaching effect on real estate as houses with an asking price of more than $10 million stack up on the Greenwich Conn. market, according to Bloomberg News. As of May 19, 52 houses at that price point were listed in Greenwich, the town just 30 miles north of Manhattan nicknamed the U.S. hedge fund capital, according to Mark Pruner, an agent at Prudential Connecticut Realty.
Only four houses in that range have sold so far in 2011 and two are in contract. At this rate, it would take 52 months to clear the inventory. If it remains till the end of the year, it would constitute the biggest real estate backlog in Greenwich since 2004.
Pruner attributes the difficulty in selling the properties to a greater emphasis on deferred compensation on Wall Street.
“Our market moves very closely with the financial markets,” he said of the town, which is home to about 90 hedge funds, according to data from Bloomberg. “Previously, if you got a $10 million bonus, buying a $5 million house wasn’t that big a deal… If you get $20 million — $3 million in cash and 17 in deferred compensation– are you going to borrow another $2 million in cash to buy a house? I don’t think so,” he said.
The changes in compensation structures in the financial sector come as a result of criticism during the credit crunch. Cash bonuses fell 8 percent in 2010.
“People have less liquidity at bonus time than they used to,” said Constance Melrose, managing director of eFinancialCareers North America, a Web network of finance professionals.
Homes in Greenwich listed for above $10 million spent a median of 204 days on the market, Pruner said, compared with 72 days for properties in the $2 million to $3 million range. [Bloomberg]