Each week the picture gets darker, with layoffs, predictions of doom and gloom, and stagnation in the investment sales marketplace. This year started with a thud, as total transactions closed and under contract for the first quarter of 2008 was $5.1 billion, 80% below last year’s levels.

Last week, some of America’s leading real estate and business leaders gave their assessments of the state of the real estate market. “Real estate is getting worse,” the chief executive officer of JPMorgan Chase & Co., James Dimon, said in a conference call with investors.

The downturn was already apparent last year: In 2007, the median price for a single family home dropped 1.8%, to $217,900, the first national price drop since the Depression, Bloomberg reported.

The CEO of the country’s fourth largest American bank, Wachovia Corp., Kennedy Thompson, said, “The U.S. economy won’t recover until late 2009.”

“Until housing prices find a bottom, the capital markets are going to be frozen,” he added.

On Friday, the equity research group of Bank of America Securities released its real estate report under the name “Real Estate Weekly Appraisal: New York City Transaction Markets on Life Support.” The report disclosed that investment sales plummeted more than 80% year to year.

A significant portion of the information was based on a conference call, and information supplied by the executive vice president of Cushman & Wakefield’s Capital Markets Group, Scott Latham, who gave an update on current trends in the Manhattan commercial investment sales and leasing market.

Mr. Latham said that well-capitalized buyers are sitting on the sidelines, while tightened lending standards are leading to lower loan-to-value ratios of 50% to 70%, and higher debt service coverage ratios, which has resulted in the disappearance of the highly leveraged buyer. Foreign investor appetite for deals also has increased, as they benefit from the weak dollar, creating an advantageous pricing environment for equity investors and giving them the ability to assume greater risk. Year to date, foreign investors are responsible for approximately 45% of total transaction volume, which compares favorably to 2007, when they accounted for only 14% of the total deal volume.

“When comparing the state of the investment sales market and capital markets today to what they were one year ago, one cannot deny the facts: The change is dramatic,” the chairman of the national real estate practice at Greenberg Traurig, Robert Ivanhoe, said. “Anecdotally, I have heard leading industry brokers and owners comment that investment sales volumes are off by more than 50%, and some would say as much as off by 75%, from a year ago.”

“Commercial mortgage backed securities volumes are off by more than 75%, as there is virtually no market for the sale of commercial mortgage backed securities in the secondary market,” Mr. Ivanhoe said. “Where sales have occurred, the spreads of the senior tranches have gone from 5 to 10 basis points to 250 basis points, while the spreads on the subordinate tranches have increased substantially more. Many balance sheet lenders that had initially stepped into the breach have either backed off or exited the markets as well.”

He added: “This environment has produced a tremendous lack of confidence in the ability of lenders to execute and deliver on loan transactions, something that seemed unimaginable a year ago, when lenders competed for each deal ferociously and were extremely reliable in performing at the closing.”

“Through all of the negativity, we must keep in mind that banks are in business to lend money,” the chairman of Massey Knakal Realty Services, Robert Knakal, said. “If they don’t lend, they are out of business. The income producing property market for properties under $50 million remains active, with plentiful financing available from several sources. We are seeing many new banks entering the market and it is not difficult to understand why. A year ago, spreads were 25 to 50 basis points. Today these spreads are 300 basis points or more, meaning that every dollar lent today is much more profitable to the lender. These new lenders to the market are looking at income-producing New York City properties at a 65% loan-to-value with these huge spreads and can’t — and shouldn’t — resist making the loans. In the past two weeks we have closed transactions with lenders that had previously been rather obscure but are stepping up their activities based upon these dynamics.”

“While there are some lenders for rent-stabilized residential transactions lending, albeit reluctantly, the market has translated this into an opportunity for buyers to reduce offers,” the senior broker at Besen & Associates, Adelaide Polsinelli, said. “The problem with the market now seems to be more about perception than reality. The fundamentals are still strong and financing is available for solid buyers and transactions. Some buyers are hesitating and lack confidence in the stability of the market, making them reluctant to commit to a deal. This is definitely not a market for the timid or weak.”

“My experience over the past 60 days is that banks have continued to raise the bar that a potential buyer-lender needs to jump over in order to get the financing they want,” the director of the national multi-housing group at Marcus & Millichap, Peter Von Der Ahe, said. “It appears that on the multifamily side, I see the bankers overreacting now, charging for risk that isn’t necessarily there, slowing the deal processes down, and this is causing buyers to become more creative.”

“For some there is a silver lining, however, as opportunities for ‘all cash’ and quick-close buyers are popping up in places where we haven’t sent them in years. That said, for good New York City multifamily, I don’t think there is any place I would want my money right now,” Mr. Von Der Ahe added.

A number of properties have been sold or are on the market. Earlier this month, Western Management sold the 13-story, 91,000-square-foot Jewelry Exchange Building at 55 W. 47th St. The Asian purchaser paid $85 million, or $934 a square foot. According to real estate sources, the buyer did not finance the transaction.

On April 30, a developer is expected to be named to lease the property at 303 W. 42nd St. The owner is seeking to enter into a 99-year land lease on the site, where a developer can build a residential tower, hotel, or office building.

Earlier this year, the 199-room Hotel 57, at 130 E. 57th St., was sold for $99 million, or $497,487 a room. The purchaser was Apple REIT Companies, which purchased the independent hotel from an affiliate of the Boston-based Rockpoint Group. Last week, the purchaser announced that the hotel, now managed by Marriott’s Renaissance Hotel Management Company, would be converting the property to the Renaissance brand.

In Lower Manhattan, where just $400 million in investment sales took place during the first quarter of 2008, Cushman & Wakefield has been retained to sell the American Stock Exchange buildings at 86 Trinity Place and 22 Thames St. The two contiguous buildings are bounded by Trinity Place, Thames Street, and Greenwich Street, and contain a total of 336,000 square feet of office space. The property presently houses the American Stock Exchange headquarters and trading floor. A prospective purchaser can redevelop the site to a maximum of 645,606 square feet, pursuant to the inclusion of an as-of-right plaza bonus.

As reported in Real Estate Alert, a Denver-based real estate investment trust, AIMCO, has retained an investment banker to market a 490-unit affordable housing property in Lower Manhattan that includes land suitable for additional development.

The complex consists of a pair of 26-story, 245-unit buildings constructed in 1970 within an area known as the Two Bridges Urban Renewal District, named for its location between the Manhattan and Brooklyn bridges.

Two buildings are on the market for sale on Fifth Avenue near 42nd Street and Bryant Park. In March, the New York Public Library announced major redevelopment plans for its main library on Fifth Avenue, between 40th and 42nd streets.

The library has retained an investment sales broker to sell the six-story building at 455 Fifth Ave., on the corner of 40th Street, which originally opened in 1915 as the Arnold Constable department store. The new owner probably would demolish the building and take advantage of zoning regulations allowing for a larger tower.

One block north of the building is 475 Fifth Ave., an office tower owned by the Moinian Group and Westbrook Partners. The owners have retained an investment broker to sell the property, which is nearly 100% vacant, making it primed for redevelopment. Industry leaders believe that the property might be sold to a hospitality company.

Investment sales volume will spike later in the year with the sale of Macklowe Properties’ Equity Office buildings. The seven office buildings on the market include 1301 Sixth Ave., 850 Third Ave., Park Avenue Tower, Worldwide Plaza, 1540 Broadway, 520 Madison Avenue, and Tower 56. In addition, the prized holding of Macklowe Properties, the GM Building at 767 Fifth Ave., has not yet found a purchaser.

A number of real estate professionals are bullish on investment sales in 2008.

“In markets like this one we see today, participants continue to embrace a ‘flight to quality’ mentality,” a managing partner at Massey Knakal Realty Services, Shimon Shkury, said. “Though trading volume has been very low so far this year, we’ve seen a dramatic increase in offers since the end of March and expect to see a significant amount of our inventory of deals go into contract over the next few months.”

Even though the preachers of doom and gloom are predicting blood in the streets, I concur with Robert Knakal when he says: “In challenging times like these, opportunity exists and entrepreneurially spirited banks and investors are going to benefit tremendously from the current conditions. Cycles are a natural part of any market but, after all, this is still New York, the greatest city in the world.”

Mr. Stoler, a contributing editor of The New York Sun, is a television and radio broadcaster and a senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.