Florida Virtual Houses

Manhattan co-op boards rejecting Wall Street’s wealthy

July 15th, 2008

Buying a co-op in Manhattan is ridiculously expensive but still affordable for Wall Street employees whose large salaries and bonuses allow them to live a comfortable New York life.

But whether they'll qualify to buy a co-op is another story.

The layoffs on Wall Street have spooked co-op boards and lenders who now see employees of investment banks and other financial institutions as risky prospects, according to The New York Times.

This could be bad news for Manhattan real estate, one of the only markets in the country that hasn't yet been hit by the housing slump. Workers in the financial sector make up about 25% to 30% of Manhattan buyers, according to Halstead Property.

In the past, Wall Street workers would count most or all of their year-end bonuses to qualify for mortgages, often borrowing amounts that covered 90 percent or even 100 percent of the purchase price of high-end condos. Now, some lenders allow buyers to count just a third of their bonus. A banker who qualified for a $3.75 million mortgage a year ago based on a $250,000 salary and a $1 million bonus now qualifies for only a $1.8 million mortgage with the same salary and bonus.

At the same time, some lenders are demanding 25 percent down, rather than just 10 percent. Thus, a banker who went to contract on a $4 million apartment a year ago with a $400,000 down payment now has to come up with $600,000 more to close the deal.

Entry Filed under: News