Six months ago, it seemed as if the real-estate bubble, like the Age of Irony, was over. New Yorkers were debating not what neighborhood they could afford but whether they could risk being New Yorkers at all anymore.
Ken Scheble, an investment-banking consultant, was in 4 World Trade Center on September 11, and by the time he got home that night, he and his wife, Melissa, were talking about sending their 1-year-old daughter to their hometown of St. Louis, to live with her grandparents. "I was saying, Thank God we'd bought on the Upper West Side," he says now, of the apartment they'd purchased a year before. "We'd been looking in TriBeCa." Six months later, Jordan Scheble is still a New Yorker. Her dad is working a few blocks away, at a client's office on Wall Street. And the family has sold their Upper West Side place for a substantial profit and signed a contract on a new loft -- off Church Street, a few blocks above ground zero.
"I thought, TriBeCa is depressed, and I can get a much bigger place," says Ken Scheble. "So I put my place on the market for $800,000, which I thought was, you know, pie in the sky. It sold in two days.
"The first place we saw in TriBeCa was 2,800 square feet, no fireplace, and anyway, you never buy the first place you see. And then everyone in January got the same idea -- prices are down about 15 percent, and everyone who was on the fence jumped in. So we told our broker" -- Corcoran's Lawrence Schier -- "If anything like that place opens up, we want it." One did, and they pounced. Since then, says Scheble, "six people have said, 'If you want to flip this thing, I'll buy it now.' "
Did these people not hear about the recession? And weren't we a city under siege just a few months ago? New York being New York, both of these facts produced not panic, not philosophizing, not mass exodus, but bargain-hunting. Rather than going into a long slump, the market merely took a little post-attack sabbatical, returning refreshed and ready to go. People who'd spent years waiting for prices to top out saw their chance, and -- like runners who can suddenly see the finish line -- they've put on a burst of energy. Open houses have been jammed, albeit sometimes with more browsers than buyers. "I had 80 people at one," says Dolly Lenz, an Insignia Douglas Elliman vice-president. "I had the doorman keep a big group downstairs, and brought them up in shifts."
As a result, the post-attack 10 to 15 percent drop felt in many neighborhoods has essentially evaporated. "December was actually a strong month," says Jeff Jackson, a partner in MMJ Appraisals. The more recent numbers, he says, look to be even better. Still, this isn't the vertiginous market that drove us all nuts. "It's not like a couple of years ago," admits Corcoran's Marlene Steiner. "If you have a property that's unique, there's a bidding war. But if you have a cookie-cutter, prices are stable."
About financial risk -- after all, this could be the next Internet-style bubble, or even a last-gasp bounce before the chill really sets in -- about the city's shaky budget, even about national security, buyers all say they've made their peace. "I'm taking a risk," admits Scheble, "but I don't think it's that big anymore. If you're two blocks away from ground zero, you're free -- you can't see it. I have friends, single people, who are looking for the most devastated area they can find. They figure that in a couple of years, this area's gonna be really nice, and they'll be set."
To an extent, you can thank (or blame) Alan Greenspan. In the past six months, mortgage rates have dipped well below 7 percent for a 30-year fixed. That means buyers who'd otherwise be priced out are sensing a tiny window of opportunity. "We doubled our space for only about $1,500 per month more," says Scheble, "mostly because of the difference in interest rates."
The same goes for people who've been saving for five years, only to see the market outrun them: They've finally caught up. Says Stribling & Associates vice-president Siim Hanja, "There are people out there looking again who were looking in Long Island and New Jersey just a few months ago. It's the old story of New York -- there's just so much energy and power here that it regenerates." Adds Steiner, "The stock market stinks, so people are putting their money in real estate. People who've been around the periphery for a couple of years are coming in and saying Let's do it." (One guy, she says, took the plunge when he realized he'd paid $80,000 in rent the year before.) Studios and one-bedrooms are the hottest part of the market, because of all the first-time buyers leaping in.
Besides, there's less panic in the air. "People are feeling, Nothing's going to happen to New York," says Schier. Even if the optimism is overstated -- and, after all, brokers have a vested interest in high prices -- we're probably not headed for a 1991-style free fall. That plunge came after a stock-market drop, yes, but it also coincided with a horrifying crime rate, a mayor unpopular with the business community, and a declining population. None of those things is true this time. "It's in everyone's interest to make New York do well now," notes Benjamin James broker James Ferrari. Scheble put it even more straightforwardly: "Everyone's been realizing that we're going to get $20 billion to get the city together."
The only business that's been slow to recover, it would seem, is the tippy-top of the luxury market. "Things weren't selling in the $10 million to $15 million range," says Elliman's Dolly Lenz. But that territory is showing faint signs of life, she's quick to add, and "in the $5 million-to-$10 million range, things are flourishing."
There is one place, at least, where it looks like a recession: rentals. Virtually all the past few years' new construction, especially in Chelsea but also on the East and West Sides, was of luxury rental buildings, and the market's saturated. "We were overwhelmed with product at the end of last year," says Stribling's downtown rental manager, Stan Ponte. "It's going to take some time for that inventory to be absorbed. We've seen the return of the $1,200 studio in prime neighborhoods" -- for apartments that could've drawn $2,000 at their peak. In Chelsea, where new towers have sprung up along Sixth Avenue like crocuses, "I've seen as much as three months free," he adds.
But you'd better not wait. "It's leveled off and stabilized," says Brian G. Edwards, who runs Halstead's rental division, Feathered Nest. "Through February, we've had a relatively busy period as well. Normally, the dead period in renting is January through mid-March, and the demand -- people who were sitting on the fence forever -- is coming back." The rental market, adds Ponte, "has the same feel that the sale market had at the beginning of the year. People are trying to lock the owners in to long-term deals. They know those prices won't be there long, and they fear a backlash from the owners who'll have to absorb a bad year." In short, says Edwards, "we've reached the bottom." And as anyone who's ever dealt with New York real estate knows, by the time you hear about the bottom, you may already be too late.
From the March 11, 2002 issue of New York magazine.