The real estate industry that created the national bubble is still alive and well in New York City.  But, the reality is that the crash is on now.  It is in full swing.

The New York real estate brokers who will tell you that the market is holding up.  The folks aren't brilliant (if they were, they wouldn't be selling something other than real estate).  Don't listen to them.  Even their own figures now show a collapsing market. 

According to Corcoran, the number of apartments that went into contract or had accepted offers in October 2008 (577) plunged by 20% compared with September and by 62% compared with October 2007 (1,588).  At the same time, the number of Manhattan listings rose to the highest level in years, rising 20% since August alone and 33% year over year, according to Prudential Douglas Elliman.

Now, both of these firms (the two largest in Manhattan) will make the argument that sales prices remained stable.  That argument doesn't mean anything, especially as they are looking at sales prices from apartments that closed, not that went into contract.  Most of the apartments that closed in October would have gone into contract much earlier in the year, and these figures can be highly skewed by a handful of big closing at new top-of-the-line buildings or conversions in midtown.

The reality is that when supply rises and demand drops, prices either fall or the market fails to clear.  We saw that in the CDO and SIV markets recently where the market went away.  Demand went to zero. 

Now, demand in real estate isn't going to go to zero, but we are already in a period where those who need to sell are looking at much lower prices from the little demand that is there.  And, those who don't need to sell will hold on for years if they can, or months and sell into still lower prices if they cannot.

Hong Kong is New York's best comparable.  Its real estate market is also completely driven by financial markets, but unlike New York, there is a real estate industry that plays to hide the truth.  It is more transparent.  And, it is widely known that the HK market is already off 30% since July.

With the stock market off more than 50%, virtually every commodity market down 50%, the cheap dollar gone, layoffs in New York increasing day by day, and the investment banking bonuses gone (as is the leverage that made those bonus larger than life and more valuable in real estate purchase terms), real estate is going to fall at 50% from its highs, probably further.  The idea that New York could not be hit will prove wrong.  This City will fall further and faster than the rest of the country.