Everyone tells Kate Dunn she’s incredibly lucky. She bought her two-bedroom, one-bath apartment in Morningside Heights in 1996, way before the market took off and left accessible home prices behind in its wake. (She paid less than $100,000.) But Dunn, a pastor, and her therapist husband have two kids now, and their 825-square-foot co-op is positively overstuffed. They would upgrade to a bigger place, but even with all that equity, they can’t, not without taking on a mortgage beyond what they can afford. They could move to a cheaper neighborhood, but it would mean a major life change. So where’s the luck? “It’s been hard reconfiguring the space so everyone’s happy,” she laments.
Sometimes, the real-estate haves and have-nots are, after ten years of real-estate madness, closer together than you think. Many in both camps are crippled by this market. A few hedge-fund types notwithstanding, lots of homeowners are just as badly stuck as those who just can’t seem to get a foot in the door. “They can’t use [their equity],” says appraiser Jonathan Miller. “They’re unable to trade up.” An extra bedroom—the most typical necessity, when a family has kids or a grandparent moves in—costs more now than ever before. The owner of a classic six may be able to sell for $2 million, but a classic seven will cost anywhere from $3 million to $3.5 million, says Bellmarc Realty president Neil Binder: “We refer to that as ‘the Leap.’ ” And virtually nobody’s pay has kept pace. Between 2002 and 2005, when average sale prices rose 34.7 percent (adjusted for inflation by Miller), average annual salaries inched up by just under 3 percent, according to the city’s Office of the Comptroller.
So what’s a longtime homeowner to do about the Leap? Binder says some choose to unload their properties and rent for a while, which can cost less per month than buying. (That is, if they can find a rental in this tight market.) Or, in classic New York fashion, they just make do. Instead of uprooting their family, Dunn and her husband are giving up a chunk of their kitchen and hallway instead to create a tiny office that will double as a bedroom. “Everything is relative,” says Dunn. “We still feel stretched, but grateful for what we have.”