Parental Lifelines, Frayed to Breaking
January 11, 2010 1 Comment
Parental Lifelines, Frayed to Breaking
For the past five years, Ernie DiGiacomo has been able to count on parents to guarantee the $1,500 to $2,500 rents he charges for the 15 apartments he owns in Williamsburg, Brooklyn. When he called renters who had missed payments, he often heard, “My parents will send you a check.”
But in the past six months, the parents are pulling back financial help, he said, and as a result, he has watched more renters move out.
“Most of them are moving back with parents,” Mr. DiGiacomo said.
Luis Illades, an owner of the Urban Rustic Market and Cafe on North 12th Street, said he had seen a steady number of applicants, in their late 20s, who had never held paid jobs: They were interns at a modeling agency, for example, or worked at a college radio station. In some cases, applicants have stormed out of the market after hearing the job requirements.
“They say, ‘You want me to work eight hours?’ ” Mr. Illades said. “There is a bubble bursting.”
Famed for its concentration of heavily subsidized 20-something residents — also nicknamed trust-funders or trustafarians — Williamsburg is showing signs of trouble. Parents whose money helped fuel one of the city’s most radical gentrifications in recent years have stopped buying their children new luxury condos, subsidizing rents and providing cash to spend at Bedford Avenue’s boutiques and coffee houses.
For 18 months after graduating from Colby College, Jack Drury, 24, lived the way many Williamsburg residents do: He followed his passions, working in satellite radio and playing guitar. He earned money as a bicycle messenger and, on occasion, turned to his parents for money.
But as the recession deepened last fall, his parents had to cut the staff at their event planning company to 30 workers from 50. Asked for his help, Mr. Drury cast aside his other pursuits and started work as a project manager for his parents. But he still plays the guitar in two bands, Haunted Castle and Rats in the Walls.
“My future is in the family business,” he said. “Music is just for fun.”
The real estate market, too, is shifting as wealth evaporates. Ross Weinstein, a managing partner of the Union Square Mortgage Group, has worked with hundreds of Williamsburg apartment buyers in the past two years.
“A lot of the money came from family,” he said. “That piece, it’s gone for a lot of people.”
In the boom years, Mr. Weinstein said, 40 percent of the mortgage applications he reviewed for buyers in Williamsburg included down-payment money, from $50,000 to $300,000, from parents. About 20 percent of the applications listed investments that gave the young buyers $3,000 to $10,000 of monthly income.
But in the past two months, Mr. Weinstein said, he has handled two to three deals a week in which the parents cut back their down-payment help.
The number of sales in Williamsburg dropped nearly a quarter in the first three months of this year compared with the same period a year ago, according to HMS Associates, a Brooklyn appraisal firm. And in three recent cases, Mr. Weinstein said, owners sold their apartments in short sales — selling for less than the bank is owed, to avoid foreclosure — because they were no longer receiving parental help.
Mr. Weinstein has been advising two brothers in their late 20s who wanted to buy a $700,000 apartment with $250,000 from their parents. But their parents’ investment portfolio has lost so much value that they now can give only $50,000. Since the brothers make about $45,000 a year each, they are now shopping for a $500,000 apartment.
The parents still wish they could help, Mr. Weinstein said, but “right now, they’re in a situation in their life where they need to ensure their own security.”
It is an adjustment that many have to deal with. Eric Gross, 26, a construction worker, was going to buy, with help from his father, a $600,000 one-bedroom condo with city views at Northside Piers, a luxury building, he said.
But his father, who works in the auto industry, said he had to reduce his contribution. “He’s pulling back the lifeline,” Mr. Gross said.
So Mr. Gross is scaling back, shopping for a $300,000 apartment, said his real estate agent, Binnie Robinson of AptsandLofts.com.
It can be hard to see the signs of financial troubles in Williamsburg because residents are so loath to show that they had money in the first place. Robert Lanham, author of “The Hipster Handbook,” said in an interview that many newer residents tried to blend in with the area’s gritty history and dressed “half the time like they’re homeless people.”
But parental help was obvious in the intersection of residents with low-paying jobs and $3,000-a-month apartments.
“You can put two and two together, that they have money coming in from somewhere else,” Mr. Lanham said.
The culture of the area often mocks residents who depend on their families. Misha Calvert, 26, a writer who relied on her parents during her first year in the city, now has three roommates, works in freelance jobs and organizes parties to help keep her afloat while she writes plays and acts in films. There is a “giant stigma,” she said, for Williamsburg residents who are not financially independent.
“It takes the wind out of you if you’re not the independent, self-reliant artist you claim to be,” she said, “if you’re just daddy’s little girl.”
The cutbacks for the more privileged residents are a welcome change for locals who have struggled to support themselves without parental help.
Katie Deedy, 27, an artist, works two bartending jobs to shore up her designer wallpaper business. Gazing out from the bar at the patrons playing darts and sipping bloody marys during a Sunday shift at the Brooklyn Ale House, she described how refreshing it felt not being the only local resident trying to live on less.
“If I’m going to be completely honest, it does make me feel a little bit better,” she said. “It’s bringing a lot of Williamsburg back to reality.”