Bonus season is always a much-anticipated end of year perk but what will 2019’s bonus season be like and will it give the real estate market the added infusion it needs?
The expectations for this year’s bonus season are all over the map. Some think bonuses will be good based on the stock market’s performance, others, like this NYT story and this Bloomberg article, say nope, “most employees will likely see a decline from last year, especially in equities trading where bonuses could fall 10-15%. Investment bankers can generally expect to see declines of 5-10%”
We have three quick questions to find out what you're hearing from your clients:
- Do you think bonus season will be good this year?
- Do you think people will use their bonuses to buy real estate?
- What have you been hearing from finance friends, family, and clients
In the good old days of the 2000s, people got their bonuses in one lump sum. The savvy people who got bonuses, would live on their good (but modest compared to their bonus) salary and buy big ticket items with their bonus. The super-savvy ones bought real estate. This, I dealt with first time buyers buying 1-3 million dollar properties.
Fast forward to 2020...Bonuses today are spread out over 3 years, not one lump sum. As such, people who earn most of their income need to wait 3 years to realize what used to be gotten in 1.
As a result, buying big ticket real estate property is a multi-year plan. If the market seems bad, many buyers have no problem waiting 1 more year since they already waited for 3. So bonus season is important and many people use it to buy property. However the multi-year distribution tempers “flash buying”.
I predict this year will be good for real estate even if bonuses are down. Many buyers waited last year expecting prices to fall. They have. Buyers are back scooping up deals.