an article in the Globe mentioned that the planned conversion of the Woolworth Building to residential condos has been canceled, and that the building will now simply be renovated for office space again, because there are too many condos on the market in Manhattan while office space is in great demand.
Yes, the supply is quite high there but I don't think it's "crashed." Either that, or the New York Times Real Estate section is printing the wrong prices!
That apartment conversion was planned during the dot-com bubble, and then was cancelled after the bust and September 11. Essentially nothing changed from say 1998 to now. The are going to renovate the existing office space to be better space, because that commands higher rents right now. Which does not mean that apartments in New York are suddenly cheap - only that offices in that area are more expensive.
There are plenty of New Yorkers comuting by train between Philadelphia and NY City to get cheaper homes. That's just how "crashed" the New York market is.