Written by: Tommy Wyher Believe it or not, there are deals to be had in the highly competitive Manhattan real estate market. This is because the market just posted its worst quarter in the decade since the financial crisis. The falling prices and rising inventory have even led to the unbelievable – prices for office space for rent in NYC have fallen. Granted, the prices are still high when compared to other parts of the country, but the falling prices could be an indication of a broader trend.In the second quarter of 2018 total sales (i.e. the number of properties which changed hand) for Manhattan real estate fell by roughly 17 percent compared to the same quarter a year ago. According to a report by the real estate appraisal firm, Douglas Elliman and Miller Samuel, the average price per property fell by 5 percent.As mentioned, the down quarter marked the first time since the heart of the financial crisis which was kicked off by the collapse of Lehman Brothers. What makes this “dip” in prices unique is that it comes at a time which the stock market – an indicator in the health of the financial services industry which is a major employer in Manhattan – has been setting new highs.While some observers believe the drop in prices might have been due to the inclement weather experienced in the city, there are some broader trends which cause concern. These include a drop in foreign buyers, to bulging pipeline of new space entering the market, as well as changes to the tax law which makes real estate in New York less attractive.At issue with the changes in tax law is the reduction in the deductions for property tax and this has impacted real estate prices in high-cost areas across the country. However, some observers believe the impact of the change in the property tax deduction might be temporary as it becomes the norm, and this could lead to a rebound in the coming quarters.Related: Timing the Market vs Investing in Real Estate Related: 6 Types of Real Estate Investment Opportunities Related: The State of Commercial Real Estate There is evidence to suggest that the market is in the midst of a reset, one which is indicative of today’s price conscious buyers. This is even true in the luxury sector where the number of new condo units under construction has been bringing prices down across the board.In fact, so much inventory is coming onto the market the report from Douglas Elliman and Miller Samuel noted that there is now a 16-month supply of luxury units alone. While Manhattan is known for its luxury properties, it is highly unusual for so many properties to be on the market or coming onto the market and this could be an indication of developers mistiming the economy.Part of this is due to the impact on New York real estate from the financial crisis, which saw prices remain subdued well into 2012. As such, many developers decided to shelve new projects until the market stabilized in 2014 and 2015.But this highlights part of the picture as the other challenge for developers is the amount of time it takes to receive approval and complete a project. This means that a project which was approved in 2015 might not come online until 2017 or later and explains why so many units are scheduled to come into the market this year.Beyond the impacts of the changes to the tax law and new inventory entering the market, another factor weighing on sales is the fall in demand from foreign buyers. According to some, this is due to several reasons including the rising. U.S. Dollar and a crackdown by the U.S. and foreign governments on using real estate purchases to launder money . Combined, these factors have led to a nearly 40 percent drop in foreign buyers.In terms of money laundering, real estate has long been a tool to help clean cash, with the “dirty money” being used to purchase a property and then the “clean money” coming out when the property is sold. While this is always a challenge in high-priced real estate markets such as Manhattan, there is very little evidence to suggest that money laundering through properties in The Big Apple is rampant.What does this mean for buyers? For starters, this is the first time in years when a “deal” is on offer when it comes to buying real estate in Manhattan. However, the down quarter does appear to be running against the broader direction of the economy and while this might be due to micro factors (i.e. rising inventories, changes in the tax code, and the lack of foreign buyers) it is too early to tell if this a blimp or the signaling of shift in the direction of the market.