"Up through the end of this summer, there were almost two markets in Manhattan, the high-end and everything else," said Jonathan Miller, president and chief executive of Miller Samuel Inc., a real estate appraisal and consulting firm.
That all changed after Sept. 7 when the government seized control of Fannie Mae and Freddie Mac, the mortgage finance giants.
"People started thinking the high-end market is just as vulnerable as the rest," Miller said.
The median sales price of a luxury apartment slipped nearly 4 percent to $4,022,000 between October and December compared with the same period a year ago, according to Prudential Douglas Elliman's quarterly report released Tuesday. The report defines the luxury market as the upper 10 percent of sales prices.
The market held up better for the merely somewhat-rich. The median price for all Manhattan apartments - $900,000 - gained almost 6 percent in the quarter, the report said. Another report from Brown Harris Stevens, also released Tuesday, showed the median sales price rose nearly 8 percent during the quarter.
But each report shows a weakening market overall. Inventory has soared and sales volume has slowed. And this is likely just the beginning.
"Most of these (fourth-quarter) sales were negotiated before Lehman Brothers collapsed. The anxiety has intensified. We'll see more of an effect in the upcoming quarters," said Gregory Heym, chief economist at Brown Harris Stevens.
The luxury market started to totter in September when the stock markets tanked and major Wall Street firms started to vanish.
Wealthy homeowners have since cut their asking prices, trying to move properties before the bleeding gets worse.
"You've got a market where suddenly people don't have the wealth they had before. Those who helped to build Wall Street to the stratosphere don't know what their futures look like now," said Rick Goodwin, publisher of Ultimate Homes and its parent publication Unique Homes.
Nearly 42 percent of the 259 Manhattan homes currently listed for $10 million or more were dumped on the market since September, according to StreetEasy.com, a New York City listings web site.
Flippers at 15 Central Park West, dubbed the "Hedge Fund building," and other new condo buildings like The Plaza and Trump Park Avenue are trying to unload their investments.
Last year, 69 sellers with properties listed for $10 million or more cut their prices - 59 of them were in September or after.
There were only 17 price increases last year, according to StreetEasy.com.
But the reductions could be in vain.
"Those who can afford to buy these properties, they're thinking it doesn't feel right to put $20 million into real estate right now," Goodwin said.
Wall Street's weekend homes are also feeling the pinch. More homeowners in the posh Long Island towns known as the Hamptons are pulling their properties off the market and booking summer renters for cash flow, said Judi Desiderio of Town & Country. She estimates the summer rental supply has increased 10 percent over last year.
Sales volume in the Hamptons has also slowed this year, but the Wall Street turmoil in September "broke the logjam" of the buyer-seller standoff, said Gary De Persia, senior vice president of Corcoran Real Estate. A flurry of sales between $2.5 million and $8 million closed in the weeks following Lehman's bankruptcy as sellers decided it would be better to negotiate on price than to wait.
"No one walked away with a wash," De Persia said. "But were they at prices that (the sellers) anticipated in the spring? No."
But both De Persia and Desiderio see opportunity for the superrich to snap up Hamptons homes at favorable prices. The so-called "East End dirt" is safer to put money into than investing cash in the stock market or depositing it in major banks, which could disappear overnight, they point out.
The luxury home market, which is loosely defined depending on locale, is showing cracks nationwide. While prices held steady at the end of the year, according to ILHM Luxury Housing Report released late last month, the number of days a property stays on the market, an average of 147 days, has shot up since September.
Ronna Brand, president of Brand Realty Inc. in Beverly Hills, Calif., said home sales over $10 million in the swanky neighborhoods of Beverly Hills and Malibu are slowing and luxury buyers are taking more time to consider their purchases. She noted that some of her clients took big hits to their stock portfolios recently and quickly got into cash positions.
"Even the rarified atmosphere of the superrich," she said, "is a little thinner."