NEW YORK ( TheStreet) -- The city's major brokerages reported prices in the fourth quarter of 2009 in the Manhattan real estate market decreased from a year ago while sales increased. I expect this trend to continue into early 2010.

Prudential Douglas Elliman and Miller Samuel reported that the median sales price of an apartment in the fourth quarter of 2009 was $810,000, down 10 percent compared to a year ago. There were 2,473 transactions, up 8.4 percent compared to last year, and 11 percent compared to last quarter. The activity is more than double the 1,195 transactions in the first quarter of 2009. Average price-per-square-foot was $1,176, flat compared to a year ago.

Brown Harris Stevens and Halstead, both owned by Terra Holdings, reported median price of $800,000, 9 percent lower than a year ago. There were 2,519 sales, 9 percent higher than a year ago.

All reports showed price decreases and lowering of asking prices, as the Manhattan property market is going through a correction. The average price per square foot is at $1,176, according to the Elliman / Miller Samuel report. Since these reports lag about three months, they basically show what buyers and sellers agreed upon last fall.

In real time, the asking price-per-square-foot is as low as $800 in the new development condo buildings. These prices reflect what the market is willing to pay and have resulted in a lot of transactions. However, these lowered prices, in line with market expectations, are only going to be reported in the first quarter of 2010. Expect prices to drop further when the first quarter report for 2010 comes out.

Lowered prices is the key reason resulting in higher transaction volume. Now that we are in winter, a dead season for real estate, it's surprising to see properties snapped up rapidly by buyers, including foreigners coming here on property shopping sprees. Out of three properties a recent foreign client was considering just two weeks ago, two already have accepted offers over the Christmas / New Year's holiday period.

Low interest rates is another reason driving transaction volume. The Fed has kept mortgage rates artificially low by buying up more than $1 trillion in mortgage-backed securities. However, the buying is expected to end as early as the first quarter of 2010.

When this buying ends, rates are expected to rise by up to 0.75 points from its current levels. Interest rates have already been rising over the past weeks. Savvy buyers who understand this are trying to take advantage of the current low rates while the Fed is still manipulating the bond market on the back end.

The expiration of the first-time home buyer credit extension in April is another reason why transaction volume in the first quarter should be higher.

Foreign buyers are becoming a key player once again. They often pay all cash and hence are not affected by U.S. interest rates. Further, they are mostly investment or pied-a-terre buyers and are not even aware of the homebuyer credit.

Foreigners are very familiar with decreased prices of Manhattan property. Brokers have seen a surge in interest from foreigners, especially from China and India, who are trying to take advantage of the US recession to acquire a piece of Manhattan.

In summary, Manhattan real estate prices decreased from 20% to 25% relative to peak. In context, this is much lower than the declines of the stock market in 2008 or the declines of property prices at similarly large cities during this housing crisis.

Prices will decrease further in the next report because there is a three-month lag time in these reports. But transactions, driven by lower prices and foreign-buyer interest, will continue surging as the market bottoms. .

This dynamic could make Manhattan the least volatile, although the most expensive, housing market in the U.S.

Wei Min, Founder of Castle Avenue Partners, is a real estate broker and investor focused on investment property in Manhattan, New York. Previously, Wei Min was VP at Citigroup responsible for a $500 million portfolio. He received Ctigroup's prestigious Chairman's Award, a recognition awarded to the top 2% of managers. He was also Director of Travel Insurance at American Express where he managed a $180 million portfolio. Wei Min's first exposure to real estate was in 1998, when he helped develop mortgage strategies at Citimortgage. He has traveled to many cities to view thousands of properties. In addition to English, he speaks Cantonese Chinese, Malay and Mandarin. He is a runner who frequently races at 10K and half marathon distance events. Wei Min holds a black belt in tae kwon do and works out at the gym almost everyday. He graduated with an MBA from the University of Illinois at Urbana-Champaign and a BBA from Marshall University. He can be reached at tan@castle-avenue.com, www.castle-avenue.com and ww.wealthre.blogspot.com.

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