In December 2008, my son was laid off from his job at a hedge fund, which had shut down operations and ceased functioning as an ongoing business. Three months later, his severance pay ended and he was still unemployed, with no job offers in sight.

My son is a homeowner, having bought a townhouse four years ago in Weehawken, N.J., just the other side of the Hudson River from Manhattan. When he walks out his front door, he can see the gleaming towers of the Big Apple in the distance. The good news for my son is that when he acquired his property, he bought at a very reasonable price with an adjustable-rate mortgage, which he refinanced a few years later with a 30-year-fixed-rate mortgage. The mortgage payments are not onerous.

This somewhat-salubrious scenario doesn’t hold for hundreds of thousands of financial service workers around the country, who, like my son, have lost their jobs. According to the Center for American Progress, a think tank located in Washington, D.C., just under 500,000 financial services jobs have evaporated since December 2007, or 7.6 percent of the 6.5 millions of jobs lost in the country over that period of time.

In Manhattan alone, the most recent estimate holds that almost 20,000 jobs were lost; many thought the number would be higher.

Many of these jobs were relatively high-paying on a national average so many of these individuals who stowed away assets and investments and are now unemployed have been able to withstand many months without a corporate paycheck. But, their time is running out and the financial services industry is still not hiring back enough workers. This is the shifting sand underneath the housing data, particularly at the high end of the market.

Here’s what is happening: Many of the financial jobs lost due to the collapse of the financial services sector — including the fall of Lehman Brothers, Bear Stearns and AIG — were middle-management positions, which in the Northeast, for example, were jobs that paid anywhere from $100,000 to $350,000 a year.

These were considered secure jobs and were probably held by up-and-coming young professionals in an age group from the late-20s to early-40s, most of which had growing families. My guess is a high percentage of these professionals improved their housing situation sometime in the period from 2001-07.

Perhaps they had first been in a starter home, then with salaries and bonuses climbing substantially, more children on the way and cheap credit available, these professionals jumped into their next house situation at the highest end of the cost spectrum that seemed reasonable.

In effect, they bought the biggest, most expensive house they could NOT really afford. After all, they were the future kings and queens of the universe, and they had only known a world where salaries and bonuses moved in one direction: up. At some point, they figured their income would catch up, or leapfrog ahead, to a point where mortgage payments were no longer a burden on their personal balance sheet.

Now they are out of jobs. Due to their wonderful paychecks over the preceding decade, many had substantial assets and have been able to maintain their ability to pay their mortgages. After a year out of work, however, their individual balance sheets are being severely crimped, and those mortgage payments are becoming unaffordable.

The situation probably won’t be getting better for them in the near future. …CONTINUED

"Unemployment is a lagging indicator, meaning that it will continue to rise until after the economy starts getting back on track," says Heather Boushey, a senior economist at the Center for American Progress in Washington, D.C. "Even after we get to the point where employers stop laying off people — and we are nowhere near there, as there are still massive layoffs each month — we will need to see very strong job creation for the unemployment rate to come back down."

These unfortunate former financial studs, many with families, are going to have to cut and run, either selling their existing homes at a loss or in a worst-case scenario simply walking away.

The top tier of the housing market by price has fallen only about 27 percent compared with 45 percent for the lowest tier, while the middle of the market is down about 33 percent, reports the Wall Street Journal.

That lag in pricing is beginning to break, and the high-end sector will probably wind up at the same place in retreat as the low and middle tiers of the residential market. Financial democracy at work!

In a column last month, I talked about the falloff in sales at the high end of the market, noting that sales in many places have almost been nonexistent. Partly that was because homeowners weren’t pressured to sell. They are getting to the point where they are now.

In July, the National Association of Realtors reported on pricing in certain price categories on a year-over-year basis. In the Northeast, home to much of the country’s financial services industries, prices improved in the $1 million to $2 million range (middle-class housing in some especially tony ZIP codes), but dropped 1.7 percent for homes above $2 million, the highest decline in any price point category for that region.

Some time in the near future, persistent unemployment will start to undermine high-end housing markets, especially in metros formerly known as financial powerhouses.

Steve Bergsman is a freelance writer in Arizona and author of several books, including "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade."


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