Bear Stearns and Real Estate Values in New York Area

Mar 17 |10:10

How will the Bear Stearns deal affect local economies and real estate values?Â Â The firm's 14,000 staff own about 30 percent of the company. Let us assume that many of those folks work and live in the New York metro area.Â We may further assume that much of their asset value/base is contained in the stock, 401k, pension, profit sharing, stock options and the like.Â That would mean that as of today, a chunk of each employeeâ€™s value has gone down approximate 96%.I would call myself broke, if that happened. Soon to be unemployed and broke!Â Many of these employees have lived high on the hog, either within their means or above their means.Â The point is that if these employees no longer have income, they cannot cover their monthly cash flow.Â The next step would be to pull their monthly expenses out of a cash reserve cushion that we were all taught to have.Â I can hope that many of the Bear people do have a cushion, but what if they do not?Â This would mean that there is a chance of a targeted group of people going upside down very soon.Â How will that affect real estate values, the local economy and even Starbuckâ€™s?Â

We might now see the slow process of a consumer pull back speed up. Seriously, if it can happen to Bear it can happen to another large Wall Street Company. It can happen to anyone of us.Â Look at my industry. Over 100,000 people have lost their jobs this year. I do not think this is the bottom, but just the beginning.Â If another large wall street company goes belly up this month, then we will see real estate values begin a dive in the Metro area.Â This might bring the foreclosures to a higher level of housing.Â Meaning that it could be more of the million plus homes in trouble. This is very alarming to me.

-Dale Siegel

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