So according to the latest numbers as reported by the one of the largest (by volume) real estate agencies in Manhattan, prices remained steady during the last 3 months. That's a relief for home owners on the island. According to the same report (and reported by New York Times), the actual number of sales fell.
Might sound scary, until you understand why this likely happened - a 5.9% drop in the number of properties available for sale. In other words, in classic economics 101 form, supply went down, so price went up, or at least stayed the same.
I think that's the key story here. With supply down, prices held steady. Other ideas - such as last year's increase in end-of-year closings to take advantage of the first-time buyer tax credit - are secondary at best. Scarcity helps to drive up prices.
There are still some issues keeping the market from flowing smoothly. For one, it's hard to get a loan if you're trying to borrow just over the Fannie Mae limit, but not way up into the luxury range (also mentioned towards the end of the NYT article). So the fact that enough properties are selling to keep prices steady despite the adversity of the mortgage market is good news to me.
Unless we end up with more inventory. According to an article in Crain's New York Business last week, NYC's foreclosure rates are going up as more properties complete the 1-2 year foreclosure process required in New York State. The statistics were not broken out over the five boroughs, and Manhattan's share of foreclosures has been small so far. But the trend bears watching.