Has the Housing Market Hit Bottom?

For months, New Yorkers have watched the rest of the nation suffer through the housing crisis while their own home prices remained stable.

Well, no more. Prices in Manhattan "fell off the cliff" at the start of this year, according to one of the city's leading real estate companies.

The median price for a Manhattan apartment fell 19 percent over the last year to $795,000, its lowest level since the second quarter of 2007, according to a report Thursday morning by Halstead Property. Luxury homes suffered the most, with an 82-percent decline in closings for more than $10 million at cooperative apartment buildings.

The sharp drop mirrors the plummeting of home prices across the country, putting in jeopardy the largest investment that many Americans make during their lives. Real estate experts believe the drop is at or near its bottom, but it could be some time before homeowners from Seattle to Miami see their values rebound.

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The Case-Shiller home price index, released earlier this week, showed, for instance, that U.S. home prices continued to decline in April -- an average of 18.2 percent in the 20 top cities -- but the pace of depreciation slowed. That was bright news for some who have been searching for a bottom.

Manhattan, for the most part, does not have subprime loans or exotic mortgages because many apartment buildings require large down payments and prohibit such loans. So when the subprime market collapsed, the city remained mostly immune.

But when Lehman Brothers filed for bankruptcy on Sept. 15, what was once a subprime housing problem exploded into a global financial crisis. Suddenly, multi-million-dollar Wall Street workers were out of jobs, out of savings or in fear for their livelihoods.

"That's really when New York got hit," said Diane M. Ramirez, president of Halstead Property. "We fell off the cliff like everybody else."

All of America Affected

Peter Morici, an economics professor at the University of Maryland, said that New York has now just caught up with the rest of the country. He said a bottom has been or is close to being reached nationally in home prices. But don't expect any quick rebound.

"We're likely to stay there for a while. The reason I say that is [that] we have 200,000 foreclosures a month coming up," he said. "The regions that have dropped the most are the ones that either have really distressed local industries like Detroit or the ones that bubbled the most."

Many families that once were looking for the largest home possible now are downsizing and looking for a home within their means.

"People are being more conservative about what they spend and they are saving more," Morici said. "You can't get around the fact that there is an excess supply of houses in the United States. Many more people had two dwellings in their name than needed them."

Real estate prices were also driven up for several years by an expectation that home values would keep going up.

"That's not there now," Morici said. "Nobody expects to get rich off real estate. When you bought in the '50s, you bought a dwelling, not an investment."

Home Prices Across the Country

As the old saying goes: All things in real estate are local. So here's a look, based on data from the National Association of Realtors, at some other big cities around the country and how they are doing in the first quarter compared to last year.

As a point of reference, the median price nationally for an existing single-family home is $169,000, down 13.8 percent from last year.

Phoenix -- Median Home Price: $129,200, down 41.9 percent. Arizona has been ground zero for the housing bust. In Phoenix, developers built countless new homes ever further away from the city center on undeveloped plots of land. As credit collapsed, gas prices climbed and traffic worsened, those neighborhoods fell out of favor. Thanks to low down payments, many homeowners in the Phoenix area now owe more on their loans than their homes are worth.

Chicago -- Median Home Price: $185,600, down 25.6 percent. You might expect steep home declines in some Chicago suburbs such as Joliet, which had a high level of subprime loans. But now, even homes in tony neighborhoods like Lincoln Park are expected to fall roughly 15 percent.

Houston -- Median Home Price: $138,500, down 6.7 percent. Energy-rich Texas has done better than most of the country through the recession. As the home-construction market that fueled so many local economies collapsed, Texas cities were able to fall back on rising oil and gas prices. While prices in Houston are down just 6.7 percent, things are even better in Dallas, which just has a 4.7-percent decline. Prices in Austin are down just 1.2 percent.

Los Angeles -- Median Home Price: $303,500, down 34.1 percent. Southern California was home to Countrywide -- the once-mighty mortgage lender -- and also became one of the first markets to collapse. Even Long Beach, Santa Ana and other parts of the sprawling city now are suffering. But L.A. is also one of the first cities to show signs of rebirth, with first-time homebuyers once priced out of the market now apparently dipping their toes back in.

San Francisco -- Median Home Price: $402,000, down 42.7 percent. The Bay Area managed to stave off the housing crisis a bit longer than the rest of California, but by the middle of 2008, home prices there, too, started to fall and then just plummeted. And they haven't stopped yet.

Las Vegas -- Median Home Price: $155,300, down 37.3 percent. Like Phoenix, Sin City saw explosive growth, with new suburbs popping up all over the desert. In the end, that growth was not sustainable. Las Vegas got a double shot of reality thanks to high gas prices, which kept tourists away -- you basically have to fly or drive there -- followed by the recession that kept away gamblers at home.

Seattle -- Median Home Price: $315,200, down 15.3 percent. While the rest of the country was suffering, home prices in Seattle still were rising. As late as mid-2008, the price of homes there were climbing. That now has stopped. The pain has not been as bad as in Arizona, but it's not pretty either.

Miami -- Median Home Price: $206,000, down 35.4 percent. If California was the poster child for the housing meltdown, Florida was its East Coast sibling. Investors, speculators and foreign buyers had flooded the market. Many people bought second homes there as an investment, maybe thinking about retiring there one day. Subprime and no-document loans flourished. Florida still is paying the price.

Atlanta -- Median Home Price: $115,600, down 24.9 percent. A combination of suburban sprawl and mortgage fraud led to some very big and very early drops for Atlanta. But these days, the city is showing strong signs of hitting a bottom. The average price of metro Atlanta homes dropped just 0.42 percent from March to April. It's not an increase, but when you've lost a quarter of your home's value, it is surely happy news.