Letter to a Young Brooklyn

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04/01/2009 12:00 AM |

In L.J. Davis’ darkly comic 1971 novel A Meaningful Life, reissued last month by New York Review Books, a young Manhattanite buys and begins restoring a dilapidated brownstone in a Brooklyn neighborhood — a move Davis himself had made several years prior. As our New Depression has closed the cycle of Brooklyn development and gentrification that has largely defined this decade, we asked Davis — who, not incidentally, won a National Magazine Award for his coverage of the late-80s S&L crash in Harper’s — to revisit his adventures in Brooklyn real estate over the course of several decades of boom and bust.

To perpetrate a cliché, mortgages are much on the national mind these days and, no doubt, on the minds of Brooklyn brownstoners, especially those who bought their houses during the mad, bad, recent days of the housing bubble. On this subject, I can offer some guidance. I was not only present at the creation of the, as we used to call it, Brownstone Crescent (the Heights, the Hills, the Garden, the Fort, and the Slope), but my own long-running adventures in the mortgage market may be illuminating.

I bought my Dean Street house in 1965, and a number of things were immediately apparent. For one thing, Boerum Hill is not a hill, it’s a valley; it is possible to stand on a corner in Cobble Hill and look down, sometimes vertically, at Boerum Hill. Second, it was the worst slum I ever saw, and I was coming from the Lower East Side; we got burgled a lot. Third, I had a mortgage from the only bank that would lend in the area (possibly because the area was the home of its head office), the South Brooklyn Savings Bank, which, after a variety of iterations, sold itself to Signature Bancorp, which then plunged unwisely and too well into the subprime market and had to sell itself to the Spanish. But to go back to the beginning. I paid the highest price ever recorded in the brief history of Boerum Hill: $17,500, a staggering sum when other houses were going for as little as five grand. And there were some interesting things about this first mortgage.

For one thing, it was easy to carry. The monthly payout was $64, $20 cheaper than my former rent-controlled digs in Manhattan on East Broadway. In practice, this meant I could replumb the new (not really; it was built in 1869) house and also buy a lot of paint remover. I had to. In its former life as a rooming house, a lot of paint — pink paint — had been slathered on the marble fireplaces. It also meant that I had a lot of walking-around money — so much of it, in fact, that my colleagues thought I’d fallen into an inheritance. And this went on for years. The brownstone history of Boerum Hill, unlike, say, Fort Greene, was a comparatively placid one. I never, in 40 years, heard of a foreclosure. I even bought myself another house with a partner — who, as it happened, got himself murdered in the kitchen. I was so awash in cash that I bought out his heirs.

Then, in the 1970s — a bad time in the mortgage market, for those of you with memories — I decided to go into the house-buying profession big time. A lot of my neighbors did too. With the success of the neighborhood — a mixed blessing; we drove out literally thousands of poor people — our homes were worth a hundred grand; if you could find a solvent bank — and I did — you were Mr. Gotrocks. Sounds a little bit like now, doesn’t it? This period, nearly forty years ago, was the only time the consumer financial industry — nation-wide, I should add — froze up.  (Two points should be made. First, such periods of indigestion — like, well, indigestion — don’t last. Second, then as now, you could make a bundle of cash by investing in interest rates. The current play is in municipal, corporate and junk bonds. Go for it.) With the cash and a hot market, I bought and sold a house on Bergen Street in twenty minutes and picked up four miserably ramshackle dwellings on Wycoff Street, which I gutted using the kids as a workforce and sold at a satisfying profit.
But elsewhere, life went on. I wrote a few novels (not a great way to make money) and, in 1972, I signed on at a national magazine where I built my reputation as a reporter through the 70s and 80s. And then I divorced my wife.  

This last act was not without cost. After the dust settled, I went to a bank and raised another hundred grand (it was the early 90s, and the Dean Street house was now worth a cool $500,000; I gave her a quarter of a million bucks as a severance payment). The monthly payout was still affordable, but I wasn’t in great shape, financially and otherwise. For what now seems like a twinkling (but seemed like eons at the time), I was unable to write, and had drained the old bank account. I had no income. So I tapped into the housing boom, slapped another mortgage on Dean Street, and raised enough cash to live on.

It still wasn’t good enough. With my kids grown and gone, and with my ex-wife far from the family house, I rather rattled around in the old place. Moreover, I was a financial reporter who had been warning for years that the country was living wildly above its means, and the housing boom had made the nation’s debt burden unsustainable — I decided to take the money and run before the roof fell in. In 2003, I sold the Dean Street place for two million bucks.

All of this, of course, may just be the tale — with a fortunate ending — of one man, but I don’t think so. For those of you who’ve made us old pioneers fat and sassy over the last eight years, my story is not a bright and happy one. The Brownstone Crescent is now awash in members of the upper middle classes, and the country is facing a housing glut that may last for years; you newcomers have gigantic mortgages, the banks are temporarily shut down, and the market for immovable property is (at best) static.

On the bright side, New York — unlike, for example, Raleigh, North Carolina — is positioned to prosper mightily in whatever economy emerges — and its outlines are unclear — from the current mess. The old Brownstone Cresent in its present form isn’t going to go away.  Note the date when I, old pioneer that I am, moved to Brooklyn. It was more than forty years ago. In New York, forty years is forever. The Brownstone Phenomenon is not a passing fancy; it will persist for the foreseeable future (which, in this city, is about ten minutes), and if you own property, it will keep you nicely abreast with inflation, although a little more slowly than in the past. As usual, it will mostly be the renters who take any hit that comes down the pike. That isn’t much comfort, but it’s all there is. Sorry about that, folks.