First, a look at the national scene to set the stage: New Home Sales Hit A Record Low.
While prices have fallen precipitously in some bubble markets (e.g. Miami, Phoenix, Las Vegas, Los Angeles, San Diego) NYC has held up relatively well. However, we are merely behind the curve here; as I've posted before NYC is subject to the same factors behind those declines.
A figurative crack in the dyke appeared in an article in the New York Times today:
Given the current sales drought, even a handful of auctions could reset prices for new condominiums citywide, said Jonathan J. Miller, the president of Miller Samuel, a Manhattan research and appraisal company. He said he expects the auctioned properties to sell for 40 to 45 percent below the asking prices of the first quarter of 2008, when the market peaked.
. . . .
There are 8,000 new condos on the market in New York City, and 22,000 more are scheduled to go on the market by the end of next year.
And from Clusterstock there is this on Manhattan inventory:
1. inventory now at 11,000 listed homes, condos and coops in manhattan which is almost 3x normal
2. inventory actually grew 1200 units over the last 30-days (the attached stats are a couple of weeks old and the listing velocity INCREASED the last 2 weeks)
I would expect to see some striking declines in apartment prices and to a lesser extent in rents over the next two quarters.
Something to think about for policy makers, as this will not be a blip, but a reversion to historical valuations based on fundamentals (price/rent and price/income ratios).
Graph taken from the Calculated Risk post linked above.