Manhattan Apartment Prices Plunge

A supply glut also worked against prices. The number of homes on the sales block grew in the second quarter and the average time to sell an apartment was 129 days, up 48% from a year ago, Brown Harris Stevens reported.

In a positive sign, however, sales picked up at the end of the second quarter, Herman said, especially on the lower end of the market as first-time homebuyers entered the market lured by relatively affordable prices and a federal tax credit of $8,000.

Sixty-one percent of all sales were below $1 million -- which is considered the lower-end by New York standards -- compared with 49% a year ago, Miller said.

Sellers are beginning to adjust to the market. In the second quarter, the number of price cuts more than doubled from a year ago, with reductions averaging between 8% and 9% for condos and cooperatives, a report from StreetEasy.com showed.

"It's the beginnings of the new reality," said Pamela Liebman, CEO of the Corcoran Group, "that 2007 and 2008 were not the norm, but the peak."