Reports released today by three major New York City real estate brokers show that the housing bust has finally hit the city, with prices falling somewhere between 13% and 19% over the past year -- depending on who you believe.

The decline isn't out of line with national numbers, but in Manhattan, the decline has been remarkably rapid. In the first quarter of 2009, some brokers were reporting a price increase of as much as 6%.

What went wrong? The volume picked up, as sellers realized that the market had changed and slashed their prices to move inventory. Sales volume was up 28% in the second quarter compared with the first quarter, according to Prudential Douglas Elliman. That's the good news: Compared with the second quarter of last year, volume was down 50%.


A separate report by the Corcoran Group and Property Shark.com showed the number of sales rose 10% or 15% from the first quarter.

The New York market is so incredibly expensive that many of the government interventions that will help the broader housing market recover will have a muted impact there. For instance, the $8,000 first-time home buyer's tax credit is very helpful for someone looking to buy a $200,000 home in the suburbs -- It covers the entire down payment on an FHA mortgage! But with the median apartment in Manhattan still fetching $835,700, that tax credit doesn't go so far, especially when high New York salaries mean that many buyers there won't even qualify for it.

In addition, efforts to loosen up credit haven't helped as much with the jumbo market that so many New York buyers need to get mortgages, and down payment requirements for NYC apartment are often well above the norm nationally.

Sales volume was up in the second quarter, but that's at least partly a seasonal thing -- the year over year decline of 50% tells a much more frightening story.