Stefania Patinella and George Evageliou live in a 200-square-foot studio apartment at the top of a five-story tenement building near Avenue C. Evageliou, a professional carpenter who found the rent-stabilized place in the mid-nineties, has devoted years to making the tiny space comfortable, lining its walls with shelves, crafting a desk beneath the loft bed, and building a kitchen island next to the stove for his wife, who runs a nutrition program for a children’s charity. Much as the couple might have appreciated more room, their lease was too good to give up, and ownership seemed like a fantasy—at least until recently.
For almost as long as Patinella and Evageliou could remember, apartment prices in New York had only moved in one direction: upward and out of their reach. “Long ago, it had crossed past the point at which any of it was connected to reality, as far as I was concerned,” Evageliou said one recent Saturday morning, as he and his wife reflected on the sudden, nerve-racking, and tantalizing possibility of turnabout. Over the course of the last year, amid terrifying economic indicators, the couple has been scouring sale listings and tromping through open houses all over the city. As real-estate disasters mount around them, casting shadows across a thicket of glass towers full of empty million-dollar condos, Patinella and Evageliou—like many New Yorkers—see a redemptive glimmer of justice, and just maybe a buying opportunity.
It’s easy to imagine why. Home values are dropping everywhere, not just in quintessential bubble markets like Las Vegas and Phoenix, but in sociologically similar locales like San Francisco, where prices have fallen by a third over the last year, according to the Case-Shiller index. In New York, the plunge hasn’t happened yet; instead, the market has ground to a halt. Many sellers have dropped their asking prices to levels not seen for a few years, but the reductions can’t keep up with the savings expectations of would-be buyers. So sales volume has decreased dramatically: It is down by almost half in Manhattan in the last quarter when compared to the same period of the year before, according to a report by the appraisal firm Miller Samuel for Prudential Douglas Elliman. It’s the same story in Queens, and even worse in Brooklyn, where sales are off 57 percent.
Brokers are reporting that after a desolate winter, prospective buyers have begun to materialize, as they always do in the spring. This year, many of them are renters with middle-class incomes that are unconnected to the financial industry, the kind of people who were shunted to the sidelines during the boom. That is, bargain hunters. The newspapers are full of stories about opulent properties that have dropped millions from their asking prices. But right now, the action—to the extent there is action—is strongest in the segment that lists below the Manhattan average sale price of $1.8 million, and especially in the six-figure market. Those are the options that Patinella and Evageliou are exploring. They have seen scores of properties since last May, and lately they’ve been looking back at neighborhoods they once dismissed as unaffordable, like Windsor Terrace. “I’m getting kind of ballsy,” said Patinella. “I’m like, $535,000? That’s just an asking price—it’s really $400.”
“What is that reality? Is it what New York was ten years ago?” Evageliou asked aloud, before proposing a tentative answer. “I think things can fall a lot farther.”
Over the last few months, brokers have been passing around an anecdote—a ghost story, really—that I’ve heard in several different variations. A cash-rich buyer looks at a property and offers 50 percent off the asking price. Later, it turns out he did the same thing at ten other properties, and—here comes the crucial part—one of the sellers actually bit. Though identifying details are hard to come by, because brokers don’t want to give anyone ideas, many say they’ve seen it happen. “We’re actually a little shocked,” said Vals Osborne, senior vice-president of Stribling and a veteran of the high-end market. “There is something crass about it.”
Crass, perhaps—but from a buyer’s perspective, smart. During the high times, real-estate people preached the virtues of the free market, while those looking to buy often felt preyed upon, but now it’s just the opposite. At One Rector Park, for instance, a just-completed 174-unit conversion in Battery Park City, developer Andrew Heiberger is offering condos at $800 to $1,000 per square foot, considerably below costs in comparable buildings in the area. But what he sees as a steep concession to the stalled market, some shoppers treat as a starting point. At another recent project in the financial district, Greenwich Club Residences, potential buyers came in with offers of $600 per square foot. “Those people are just dismissed,” Heiberger says indignantly, contending that such “bottom-feeders” don’t understand real-estate economics. But as any bottom-feeder knows, all you need to find is one seriously motivated seller—and if that’s not Heiberger, it might very well be someone else.