In a saucepan over medium heat, melt butter, then add apples. Stir occasionaly for about 2-3 minutes allowing the apples to soften.
Add 1/4 of water, brown sugar, cinnamon, nutmeg and vanilla. Stir until combined and allow to cook for another 2 minutes or so on medium low heat.
In a small bowl, mix 1/4 cup water with corn starch. Add to the apple mixture and let it come to a boil. Boil until it reaches desired thickness (about a minute or two).
Transfer to a bowl and keep warm until you're done making the pancakes.