At times like this, when large fluctuations in prices are occurring quickly but not systematically, the art of spotting a good deal becomes a whole lot trickier - and a whole lot more important.

A number of factors complicate the matter. The first and foremost of which is the role of your home in your personal finances. For most people, even for many exceptionally wealthy people, their home is their single largest investment. Keeping this fact in mind complicates the buying process. Finding the best deal becomes not a process of finding the lowest price on a reasonable piece of property, but a search for a New York City apartment that is also a quality long-term investment.

Second, at the end of the day, no matter how many great search engines and housing listings there are, nothing can substitute for the actual visiting of apartments. Homes are idiosyncratic things, and you’ll often find something that you really cherish, but that doesn’t necessarily add much to the final price tag. These types of almost quirky New York City apartments are often where you find the best deals, when you find the one that is just right for you.

It’s this type of apartment-to-apartment, on-foot searching that is often the most crucial stage of the buying process. It’s also where working with a buyer’s broker can save you an incredible amount of time and effort. Buyer’s brokers know the market like the back of their hand and aren’t interested in selling you something from a limited inventory.

One statistic that is particularly helpful in determining whether or not an apartment is a great deal is the price per square foot, not as it relates to all apartments in the city - though that’s helpful, too - but how that price relates to similar apartments.

A particular point to remember when on the prowl for deals: 20% off of a New York apartment that was 30% over-valued is still a bad deal. In this city, prices shot sky-high before the crash, and they are going to take a while to come back to earth. Right now, a lot of the price movement has been movement off peak prices - not off a more objective measure of the actual value of the apartments. All this is to say that you shouldn’t be dazzled by the difference between the current and previous asking price.

Sellers all too frequently confuse their hoped-for price with the actual price. Real estate markets function: If no one was buying at the previous price, it was for a reason.

It’s a funny thing about New York City: It is such a big market that stories that would normally be found in the “local” news section gets somehow transported to the desk of national news writers.

It’s nice that the city gets so much more attention. When national reporters write about New York stories, though, they often write with a broad brush, national perspective. That can lead to particularly bad coverage of local markets, the New York apartment market being first among them.

Such was the case with the Reuters article from last week that caused such a stir in the New York City real estate market. While local real estate reporters have long been aware of the time-lag between the NYC and national markets, Reuters printed an article that, with alarm bells ringing, states that the NYC market is experiencing a totally different part of the business cycle than most other major urban markets.

Yep. Pretty much any local writer or real estate agent could have told you that the New York apartment market entered the decline later than the real estate markets that helped lead us into this recession; and so, we’re not yet in recovery mode.

Like most markets, the New York real estate market isn’t chronologically in sync with the national market. That has been clear for years. When Reuters publishes a major article on the market, though, it apparently sees fit to ignore the quality reporting that many local writers have been humbly working on throughout the recession.

The bottom line: Yes, right now the New York market is weaker than most national markets, precisely because it has been so strong for so long. That current weakness doesn’t reflect an underlying shift in the fundamentals of the market. Rather, it simply means that developments in the New York real estate market lag the national market by at least two quarters.

That time lag comes in part from the city’s avoidance of the direct effects of the subprime crisis. The city’s co-ops’ higher standards for owners’ financing acted as an effective “second layer” of regulation, minimizing the number of New Yorkers with subprime loans. So, instead of the market being pulled down by the subprime mortgages themselves, it wasn’t until the securitized debt version of these subprime loans dragged down the rest of the financial sector that New York really started to feel the pinch.

That delay is ultimately a good thing. It means, though, that we got knocked down later, so we’ll get up a bit later, too.

in Manhattan real estate worst seen yet to come [ Reuters ]

The real estate market, in comparison to most markets, moves at a glacial pace. Housing and property are, after all, two of the most illiquid assets you can buy. That illiquidity makes sense: you can never move it; for most lots it’s hard to sell just part of it and keep the rest; holding it costs money; selling it costs money.

What keeps real estate looking so attractive to so many investors, however, are the potentially huge returns. All in all, though, the transaction costs are huge in any real estate market, and that keeps the market from responding as quickly as, say, stock or bond markets.

The glacial pace at which the national market moves is reflected in the New York real estate market. In fact, mainly because the New York market dodged most of the direct effects of the subprime crisis, a significant lag has developed between its price movements and other major national markets.

Like most markets, the real estate markets follow certain patterns. Economic geographic patterns of the business cycle being one of the most predictable. Usually, when the market is dragged down by macroeconomic events – like the New York apartment market was – marginal neighborhoods are hit first, then middle class ones, and then towards the end of the downturn, those luxury markets most insulated from the economic cycle take a hit.

This might be overstating the pattern a bit. All of this happens pretty quickly, but sometimes there is a lag of one or two quarters. We saw this happen with the New York apartment market, as Harlem and other neighborhoods watched property values plummet, even as new condo sales were keeping at least the average price of the luxury market afloat for some time.

Witness, though, the cold hand of time. Two major aspects of the high-end luxury New York apartment market, the Hamptons and new Manhattan condo sales, are coming back down to earth. Sales in April of new Manhattan condos fell roughly 70% from last year’s figures. This number was in part powered by developers and lenders’ unwillingness to lower their prices, relative to other sellers.

The Hamptons, the fabled summer playground of the wealthiest of New Yorkers – I’ve always preferred Martha’s Vineyard, myself – many properties are now selling for less than two thirds of their initial property values.

These markets are still stronger than many others within the larger picture of NYC real estate. The global recession, though, has finally, literally reached home – driving down the property values of those New York financiers that caused it.

As the New York City real estate market has fallen back to earth, the central question now is how much further it will go. There are some anecdotal signs that the free-fall the market has experienced during the past several months is now over. To some analysts at major New York real estate firms, it appears the decline continues, but at a slowed pace. At least some sense of normalcy, maybe, has returned.

Of course, large companies that have billions of dollars sunk in the real estate market will always manage to produce experts who can find anecdotes and preliminary evidence to support claims that the market is coming back. Something, however, has given the latest round of mildly optimistic news articles more credibility than usual: They have coincided with the seeming return to normalcy in the national labor market, the single most important market for the nation’s economy.

Again, like the stories of the New York City real estate market, no one is claiming an end to the decline. In fact, by any normal standard, last month’s jobs report, that the nation lost well over 300,000 jobs, was a horrible report. Keep in mind, for instance, that the economy needs to produce a bit over 100,000 new jobs each month just to keep pace with population growth and changing demographics. However, a loss of 360,000 or so jobs is at least a report that can occur in normal economic times.

When the economy is shedding 500,000+ jobs a month, it basically means that the economy is shedding jobs as fast as it structurally can: If employers could abdicate contracts faster, they would. So, there’s no telling where or when the damage will stop.

With numbers like last month, economists can begin to get a grapple on things, and normal economic factors can again have an effect on consumers who no longer resemble unresponsive, scared-stiff deers stuck in the headlights.

One of those factors has been the change in the US dollar that has resulted from a reduction in the general sense of panic in the economy. A couple of months ago, it was as high as $1.28 per euro. Since then, it has lost just under ten percent of its value vis-à-vis Europe’s main currency.

While that sounds bad, it is actually good news for the economy as a whole and especially the New York apartment market. It makes the market much more attractive to the European buyers that were so important to market demand in 2007 and much of 2008.

No one is saying the decline is over, but with a return to some degree of normalcy, positive developments like a decline in the US dollar can begin to again exert influence on the New York apartment market.

In one sense, little has changed in the Manhattan Real Estate market since the last quarter. Prices are still heavily depressed from their peaks, down as much as 30% in some areas. Inventory levels are still high and show few signs of abating. Offers are being made, but they often come in the form of lowball, aggressive buying tactics by buyers looking to capitalize on current uncertainty undermining sellers’ confidence.

If we shift our focus away from the economic fundamentals and look instead at the current psychology of the New York apartment market, though, the picture today is very different from the mentality that has pervaded the market for some time.

Uncertainty is still a huge factor, of course, with many buyers continuing to sit on the sidelines and wait for even better deals to emerge. Especially after last week’s jobs numbers, however, there is little sense that the market is in the free-fall that has characterized recent months.

Whether or not we are still in decline is a different question than the more practical matter of whether or not we are close to the bottom. Some neighborhoods may still see significant downward adjustments in their price structure. For the most part, however, it is clear that, as the labor market appears to be returning to normalcy, the New York apartment market, while not ready to start improving, is also returning to normalcy.

Prices may continue to adjust downward for the next several months, but it is clear that they will move at a much slower pace, barring any new, additional major shocks to the national economic system. At any rate, though, it is clear that the market is not too far from its bottom – and that’s the first time that this blog has felt declaring that since the crisis began.

The recent dive in the US dollar has also helped the market, and should lead to an uptick in foreign acquisitions over the next few months.

One particular bright spot of the past couple of weeks has been the super high-end market, where a number of sales have been completed valued at $10 million and up. This may be a sign that the most savvy investors in the NYC apartment market feel confident that the end of this quarter and next quarter are the time to implement the classic buy low and sell high market strategy.

There is still risk, but the risk now is composed of a mild continued decline in prices, not a free-fall that paralyzes markets. The reward may be a double digit increase in property values over the course of the next five years.