In Manhattan, for instance, sales of condominiums and co-operative apartments fell 52 percent in January, according to Miller Samuel, an appraisal firm.
The market has been hammered by layoffs on Wall Street, tighter lending standards and a glut of new buildings, said Jonathan J. Miller, chief executive of the firm.
“The leverage is being squeezed out of the economy.”
New York is not alone. Real estate sales have also slumped in cities like San Francisco and Seattle, which previously seemed impervious. California’s recent experience might offer one roadmap of how the housing slump will play out in other places. But the process will be painful and slow.
So April, when buying traditionally picks up, could be the cruelest month yet for the housing market.
“You are really looking at a very, very ugly outlook,” said Ivy Zelman, chief executive of Zelman & Associates, a housing research firm.
In recent months, many banks and mortgage companies have suspended foreclosures voluntarily or because of state moratoriums meant to encourage negotiations between delinquent borrowers and lenders. Experience, however, shows that these suspensions merely delay foreclosures, and that foreclosed homes soon flood the market.
Another big concern is that homeowners with solid credit records will fall behind on their mortgages in greater numbers as unemployment rises.
So for now, the American dream of homeownership is a dream deferred for many people. Growth in the number of households — defined as families or unrelated people living together — slowed last year, to 1.1 million, from an average of 1.4 million a year from 2000 to 2006, according to George Masnick, a researcher at the Joint Center for Housing Studies at Harvard University. Economists say the growth rate will likely fall further in 2009.
Many of the vacant homes are concentrated in far-flung suburbs in the Southwest and in Florida, which means that prices there may not return to their highs for many years. It also suggests that much of the country does not have as large an oversupply of homes.
Troubled housing markets do not rebound quickly. The first thing to turn up are sales of homes as banks and individuals acknowledge that prices are no longer what they were; some of that is already happening in California and Florida.
Home prices tend to lag sales by a couple of years. That is what happened in Massachusetts and California in the early 1990s.
How long will the current slump last?
A futures market for home prices provides one sobering forecast. Trading in contracts that track home prices in 25 metropolitan areas suggests that home prices will fall about 15 percent this year and hit bottom in 2010, according to Radar Logic, a firm that created the index on which the trading is based. The market is also predicting that the Los Angeles area is closer to the bottom than New York.