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To Buy Or Not To Buy

It's our special obsession. We track its every twitch in microscopic detail. But on September 11, the real-estate market froze. As it slowly begins to thaw, it's clear that a buyers' market is emerging. But are there going to be any buyers?

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Oliver Miede spent the summer on a wearying search to buy a classic six on the Upper West Side. In the spring, his landlord had hiked the rent on the West End Avenue prewar apartment Miede had leased for the previous five years with his wife, Barbara Nuddle, by an astonishing 70 percent. "We felt that with rents shooting up to that level, we'd be foolish not to buy," says Miede. But as prices scaled Himalayan heights, he discovered that family-size prewars to buy were not only expensive but as scarce as oxygen at 29,028 feet. On the weekend before September 11, the couple -- committed Manhattanites -- had been reluctantly shopping in Montclair, New Jersey. By 10 a.m. the following Tuesday, everything they thought they knew about buying and selling apartments in New York was obsolete. Six chaotic weeks later, they still have no idea what the new rules are.

Real estate is a special New York obsession. To us, Chelsea-brownstone transactions are worthy of their own gossip columns, as titillating as any Hollywood peccadillo. More practically, real estate is a futures play, a commodities market where everyone's a player. To buy in New York is to bet on a better tomorrow, and the obscene prices force us to track the market in microscopic detail. In a country where most people budget a quarter of their income toward housing, New Yorkers can often be forced to fork over more than half.

Not that many of us didn't benefit from the recent real-estate bull market. Indeed, prices rose so far so fast during the late nineties that to double the value of our property seemed like a birthright. That confidence is gone. After the World Trade Center collapsed, the real-estate market didn't just stagger; it did something much more disorienting. It froze. At first, many brokers didn't even bother reporting to work. The shock then gave way to fear -- what next? -- which has since morphed into total confusion.

No one has ever seen an assault on the market on so many fronts. Wall Street bonuses were already shriveling, layoffs looming. But now the post-Giuliani political uncertainty suddenly feels all the more perilous. Rebuilding after the Trade Center could push the city into a financial crisis to rival that of the seventies. Then there's the wider recession. Then there's the war.

"It's very tempting to sit on the sidelines and wait and see what happens," Miede says. "On the one hand, it seems like we could wait six months to a year and see prices of condos and co-ops drop 5 or 10 percent." (No mean reduction on a $1 million deal.) "On the other hand, we feel like we have to get out now because of the rent. It's like we have a gun to our head."

One Wall Street couple pulled out of a $5 million East Side condo, forfeiting their deposit of $500,000.

Last Monday, one alarmed Upper West Side broker called Miede to tell him she had just had more listings come on the market in a single day than in any full week during the year. The market was tanking. The next day, she reported, daily volume was back to normal. Miede was baffled.

Evidence of panic turned up immediately after the attack. Alan Rogers, chairman of Insignia Douglas Elliman, tells of one Wall Street couple pulling out of a $5 million East Side condo, forfeiting their deposit of $500,000. And the panic was reflected right across the economic board. A West Village financier recalls how she stayed up all night on September 10, angst-ridden over an offer on her apartment that fell a few thousand dollars short. The day after the attack, her bidder came back with a new offer, slashed by $30,000. "It was immature -- insulting, really," she says. "I have an M.B.A. from an Ivy League school. It was as if I knew nothing about business."

In Harlem, Mike Larkin had been haggling with a buyer all summer for his restored brownstone on a landmarked block of West 119th. In August, the bidder, a lawyer, finally agreed to terms just below the $799,000 asking price. The contract was to be signed on September 11. It wasn't. "The guy told my broker that he was going to wait for the market to drop," says Larkin, 40, who'd bought the house eighteen months ago and promptly launched a grueling, costly renovation. Now he fears he'll be forced to rent out the property, worried that even its mahogany pocket doors opening onto the elegant Victorian parlor will not entice a serious buyer. "I know that so many people have died, and I don't want to sound like a crybaby," says Larkin. "But it's very frustrating. At every level, buying property in this city is a pain in the ass. It takes so long, there are so many lawyers. But it's not just annoying; it's a financial hardship. There are the carrying costs -- the mortgage, maintenance, Con Ed. These things don't stop just because of the attack."

By the first weekend of October, Realtors were laboring to return to a healthy schedule of open houses. But Wendy Divack, a broker at Charles H. Greenthal & Co., was concerned by a spike in the number of properties. Manhattan listings at Greenthal leaped from 43 to 93. "This could be a real buyers' market," she said, caressing the charcoal granite kitchen counter at a two-bedroom she was showing on East 76th. "The question is whether or not there are going to be any buyers." Alas for Divack, her open house coincided with the first cruise-missile launches of Operation Enduring Freedom. New York was slumped in front of CNN. Precisely seven browsers showed up.

"Real estate is equal parts investment and emotion," explains Ron Gallen, a prominent Upper East Side financial counselor, highlighting the current confusion. "People are looking at all their real-estate options because they're trying to focus their anxiety. It's like buying a gas mask. They're struggling to find substitutes for the sense of control they used to have."

At least the initial talk about a flight to the suburbs has waned. Stephen Meyers, president of Westchester and Putnam's Houlihan Lawrence, says that this month, only a handful of calls have come in to any of his 24 offices from anxious New Yorkers. Kathleen Milinkovich of Coldwell Banker in Caldwell, New Jersey, says that while the number of weekly calls blossomed -- 10 to 15 a week before the attack, 20 to 25 after -- the volume remains unremarkable. "I think people in New Jersey are as concerned as New Yorkers," she says. "They commute, and were very affected by the tragedy."

Back in Manhattan, some brokers say co-op boards are growing more stringent, paying extra attention to an applicant's job security and the overall health of his or her industry. But the only megatrend to have emerged so far is uncertainty. "Anyone who says they know where things are heading is, frankly, bullshitting," says Elliman's Alan Rogers. "You can find anecdotal examples of anything right now. I've heard of a few people who had signed a contract suddenly renegotiating for 30 to 40 percent less and being successful. But overall, prices are not being slashed. There were quite a few overpriced properties out there, and this might have just been the wakeup call."

Even so, the ETrade instant-sell impulse that helped torpedo the nasdaq is hardly an option in housing, where five lawyers and four months of paperwork typically stand between the first offer and closing. You can't decide to bail out on your place on Wednesday and walk away with the cash in hand on Thursday.


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