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.
“Like so many people, my wife and I we were factoring in these enormous equity gains and figuring out when to cash out and take that next step up the ladder,” says a Brooklyn Heights photographer who bought his first home two years ago. “Right now, with everyone sitting on the fence, we don’t know if we still have that cushion.”
Despite the lingering doubts about the future of downtown, Dennis Margulies, a West Village-based broker for Debra Kameros Company, stresses that it’s too early to redraw New York’s residential map: “People don’t want to pick up and move, even to a different part of the city. New Yorkers get attached to their neighborhoods at a very deep level.”
History provides little guide to urbanites looking to chart the safest course. In past downturns, the fringey areas that were last to gentrify were often the first to turn back. It was always a flight to quality. This time, no one’s sure if even that will hold. Will nervous shoppers in TriBeCa look to Park Slope as an oasis from Manhattan tensions?
“Even if Brooklyn Heights is just one subway stop away, the river makes a world of difference,” says Melinda Magnett, the Corcoran Group’s Brooklyn chief, who reports an uptick in Manhattan buyers who see the East River as a kind of moat. That said, right after the attack, Corcoran lost a sale from one couple who had offered almost $1 million for a Columbia Heights two-bedroom with a sweeping view of the downtown skyline. “They just didn’t want that constant reminder,” she says.
Real estate downtown, of course, is likely to remain a vexing question for some time. Regardless, brokers in TriBeCa insist they’re starting to feel familiar rhythms once again. “I’m busy enough, busy as I need to be right now – let’s put it that way,” says Elise Ward, a veteran TriBeCa broker. “For the first few weeks, you couldn’t even get an appraiser to come out, so how are you going to get financing? But I’m showing ten places tomorrow, and I have a number of people who seem very serious. I don’t want to sound Pollyannaish, but TriBeCa has always appealed to pioneers, to artists and the like, and I’m sensing more determination than ever to bring the neighborhood back.”
As breathless as Realtor-speak once seemed, it now sounds almost necessary, with brokers turning out to be the city’s first line of defense. “I’m busier than I have been all summer,” Elliman’s Joe Souza says defiantly. “I had a closing two days after the attack and am looking at three contracts from the weekend. I have a couple of empty-nesters in Larchmont who are about to make an offer on the Upper West Side. Things are a hair more negotiable, but I don’t see any mass movement in prices.”
One of his clients was Joseph Skarzynski, the medical director of Jacobi and North Central Bronx hospitals, who, before the attack, used to enjoy a twenty-minute commute from Forest Hills every morning. The day the city set up roadblock inspections at bridges and tunnels, Skarzynski never made it to work. “I never even made it to the Whitestone Bridge. After seven hours, I took the 20th Avenue exit and ran to the bathroom. I knew it would be another five hours, so I called Joe Souza. I just said, ‘Hey, we gotta go out this weekend and find me an apartment.’ ” The following Sunday, he made a down payment on a one-bedroom condo on East 86th Street.
For those locked into deals at pre-September 11 prices, it feels churlish to complain. “It was the worst possible timing,” says one Chelsea mother when reminded of the lease she and her husband signed for a duplex on West 13th Street on August 31. It wasn’t the handsome Federal-style walk-up with wisteria entwined on the rear deck she regretted. It was that her family signed off on the deal while their spacious Chelsea loft was still on the market. “If this were all just about the economy, I would have really kicked myself. But the Trade Center falling puts your own ‘disaster’ in perspective pretty fast. I’m sure we will take a hit, but at least you learn to enjoy life in the details. You’re so glad to see your kid’s blond head as he walks across the room in the afternoon sunlight. In a moment like that, it doesn’t really matter how big the space is.”
The West Village seller with the M.B.A., whose buyer slashed his initial offer by $30,000, is equally sanguine. “I understand economics,” she says. “Like the stock market, you’re going to see it go down for a while and then eventually turn up. The fact is, interest rates are the lowest they’ve been for 40 years. Even if the market dips, monthly payments are going to be so low it’s not going to matter.”
Back on their fence on the Upper West Side, Miede and Nuddle feel a little less desperate. “The market is so uncertain that even to make an offer, we’re going to have to get swept off our feet,” he says. For owners, should it materialize, a significant market dip would be a frightening prospect. But for the city, it might also involve a welcome cultural spinoff. “It was becoming a city for the very rich or the very lucky,” says Miede. “The red-hot market was pushing out everyone who made the city what it was – creative people, middle-class families. It was very unsettling for someone like me. I came here with a dream.” Miede moved to New York from Los Angeles in the late eighties, another unnerving era when many considered New York’s fate to be sealed.
“Everyone thought I was crazy at the time,” he says, laughing. He figured the city’s sheen would wear off in two years or so, then he’d head back to the stucco bungalows of Los Angeles. He didn’t. And now, he says, he won’t. “Everyone in California is saying to us, ‘Now are you going to come home?’ We just say, ‘Sorry, we’re addicted.’”