Until very recently, Manhattan real estate had been a beacon of strength in an otherwise weak housing market.

But now sales volume has tanked and prices are starting to fall along with the rest of the country. The median sales price on high-end coops and condos has fallen 20% since it peaked in mid-2008 and it could get worse. Inventories are on the rise and sellers are slashing prices but still failing to find buyers.

Real estate sales star Dolly Lenz tells Barron's that a Manhattan apartment now "has to be 25% off the last sale for it to be a bargain. People have no sense of urgency. A sense of urgency is what the real-estate market needs as a stimulus."

A video with the story suggests prices could fall another 30%.

One culprit is the tanking financial services industry. Bonuses are falling and expected to fall further, and workers who had the bulk of their personal fortunes tied up in the stock of companies like Lehman Bros., Bear Stearns, Bank of America (NYSE: BAC) and Citigroup (NYSE: C) are now feeling -- and in some cases are -- poor.

The biggest problem for New York City may be that even after the recent declines, home price to median income ratios are still far higher than other parts of the country and relatively high compared to the city's recent history.


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