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The Nolan's new apartment is made up of four railroad rooms—a kitchen, two bedrooms, and a front room. The house is a humble place, but Francie finds things to like about it. The kitchen looks out over a small, concrete yard where the Tree of Heaven grows. The bathtub in the new house is really just two washtubs, with a very uncomfortable bottom. The dingy airshaft outside of the bedrooms, which lets in only dank air, snow, and rain, reminds Francie of what Purgatory must be like. Francie loves the front room, which, once decorated, becomes a happy place. She loves the piano that the past renter couldn't afford to move out. Johnny can play just a few chords, and sings along with them. His playing touches Francie to the point of tears. Also in the front room was the conch shell that Francie and Neeley named "Tootsy." When Francie first saw the ocean, the only remarkable thing about it was that it sounded like the conch shell.
On the other side of the yard is the school, and one day Francie sees a girl clapping erasers together. Showing off, she comes closer to Francie to let her touch them, and then spits in Francie's face. Francie begins to dislike blackboard erasers, which before seemed like enchanting objects.
The narrator explains that neighborhood stores are an important part of city children's lives, and then details all the stores around the new apartment in Williamsburg. Francie's favorite is the pawnshop, because she loves the three golden balls that hang above it. There is a bakery and Gollender's Paint Shop. The most interesting store is an old-fashioned place owned by a cigar maker who refuses technology, and sometimes makes his cigars by candlelight. Another store sells only tea, coffee, and spices. It has a large grinder, but the Nolans grind their coffee at home. Francie especially loves the pair of scales in the tea man's shop. A Chinaman owns the store where Johnny gets his shirts cleaned. Francie thinks his self-heating iron a mystery of the Chinese race, and wishes she could be a Chinaman.
Katie agrees to trade Miss Lizzie Tynmore, a neighbor in their building, an hour of housecleaning for an hour of piano lessons. Katie instructs her children to listen quietly during the lesson, although Katie is officially the student. Francie is fascinated both by Miss Tynmore's hat, which has a red bird pierced by hat pins, and the metronome. At the end of the lesson, Miss Tynmore lets Katie know that she is teaching three for the price of one, but still allows it.
When Miss Tynmore does not leave, Katie finds out she expects tea. With no tea to offer, Katie goes to fix her coffee and a sweet roll. The narrator explains that Miss Tynmore needs the tea women serve her after lessons, since she does not have much money for food herself. In the meantime, Miss Tynmore asks Francie what she thinks about when she is sitting on the curb for hours. Francie answers that she tells herself stories, and Miss Tynmore commands that she will be a writer one day.
Johnny tries to one-up Katie by trading voice lessons for Francie from the other Tynmore sister in exchange for repairing a broken sash cord. He cannot fix it, and ends up breaking their window. Katie has to work extra hours for the sisters to make up for it.
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