Manhattan real estate market finally craters

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%.