Instead, he became vice chairman and president of Merrill Lynch’s U.S. banks, just before his old company, which, along with Fannie Mae, guarantees or owns around half of the nation’s $12 trillion of mortgage debt, plummeted so theatrically (the stock went from $67.20 to $3.89 in 52 weeks) that the entire American economy has apparently been jeopardized.

It’s unlikely that any of the $12 trillion in mortgage debt comes from Mr. McQuade. According to city records, he just paid $3.175 million for a 1,917-square-foot apartment in the Museum Tower on West 53rd Street; there are no mortgage filings along with the deed, which suggests he paid in cash.

His seller, a lawyer named Vaughn C. Williams, paid $2.7 million for the apartment in March 2006 (and, incidentally, took out a 90 percent mortgage).

“The Museum Tower apartments are—what’s the word?—very expansive,” said the listing broker, Elese Reid, though she wouldn’t comment on the sale. She paused to search for a better term. “‘Large scale,’ that’s what we want.” Out of the living room corner’s floor-to-ceiling windows, for example, you can see both the Hudson River and the ice skaters at Rockefeller Center.

A Web site called Cityfile broke news of the sale.

mabelson@observer.com

As markets around it melted—Miami, Phoenix, Boston, pretty much the whole of flyover country—Manhattan’s remained utterly, stubbornly successful.

You’ll have heard another story: that Manhattan’s housing market was red-hot in 2005 and was in 2006, like so many cities nationwide, slowing or cooling or bursting (or whatever-ing). But it’s largely untrue based on the numbers.

Sure, it took longer to sell a home if you tried in the last 12 months, but sales closed fairly evenly compared to last year—and prices were way up in some cases.

At the end of the third quarter of 2005, the average sales price was $1,149,813; up it went the following third quarter, to $1,288,748, according to the appraisal firm Miller Samuel, which releases a quarterly report on the borough’s housing market with one of Manhattan’s biggest brokerages, Prudential Douglas Elliman. This third-quarter 2006 average was also up over the year-end 2005 average of $1,221,265.

The first-quarter 2006 average was a sharp increase over the fourth-quarter average of 2005: $1,187,404 to $1,300,928. The average Manhattan apartment price, in fact, increased year over year in each of the first three quarters of 2006, and it looks likely to do so in the fourth, which ends Dec. 31.

The median price—a better indicator of the market than the average—was $750,000 in the third quarter of 2005, and it rose to more than $845,000 in the third quarter of 2006. The median increased year over year during the first three quarters of 2006, in one case particularly sharply: It set an all-time Manhattan record of $880,000 in the second quarter.

But these are prices, which are only good, really, for sellers—and their lawyers and brokers.

For most buyers, the important thing is what happened to sales in 2006 compared to 2005.

While they didn’t spike like prices, sales either increased slightly or stayed generally steady this year. In the first quarter, Manhattan condo and co-op sales dipped slightly year over year, according to Miller Samuel, and in the second quarter, they dropped more than 11 percent. But in the third, sales were up nearly 6 percent between 2005 and 2006.

In 2005, 7,780 apartments were sold in Manhattan. In the first nine months of 2006, 6,052 were sold, putting this year on pace to surpass 2005, not that that’s any particular thing to brag about loudly: 2005 had the lowest number of apartment sales of any year since 1998. (Generally, no more than 10,000 homes change hands yearly in Manhattan.)

It does take longer, on average, for Manhattan owners to move their apartments. There is nary a real-estate reporter alive who hasn’t heard mild horror stories of price chops and sparse interest at open houses this year. Miller Samuel reports that the average number of days it takes to sell an apartment rose from 133 in the third quarter of 2005 to 150 this past third quarter.

And mortgage rates ticked upward, particularly during the summer. (Still, rates now are generally lower than at the start of the year. The rate on a 30-year, fixed-rate mortgage in January was 6.21 percent, according to Freddie Mac, and 6.12 percent by mid-December.)

Otherwise, the Manhattan housing market over the year that’s about to end has remained fairly strong indeed, though the pessimistic storyline sounds loudly still.

Blame the media, brokers tell The Lab. Others cite an entire category of real-estate blogs devoted to the bubble theory, relying heavily—even gleefully—on the pessimism from 2005 going into 2006.

Ironically, many of these so-called bubble-burst blogs went bust as the wider storyline of a total national housing-market collapse lost steam.

And perhaps that’s just it: The Manhattan housing market is … normal. Boringly, stoically normal.

Any ups and downs that might plague other metropolises simply don’t penetrate Manhattan housing, where $400,000 for a decent studio (four walls, a floor and a ceiling) is considered, without irony, a steal.

The last major dip in the Manhattan housing market, in the late 1980’s, was spurred more by changes in the tax codes than by anything else. Even the recession of the early 1990’s—even the terrorist attacks of 2001—couldn’t truly wallop this market. In 2002, the number of Manhattan apartment sales hit a now-six-year high of more than 9,500.

Steady. Even. Normal. These are adjectives, too, for the Manhattan housing market. They’re just not that cool.

Were you one of those investors who thought that during the height of the bear market, residential real estate was a better investment than stocks, bonds and gold?

Were you heartened that the paralytic U.S. Congress did nothing to impact real-estate prices and the Federal Reserve's 12 interest-rate cuts made it easier to buy and refinance real estate?

Despite all the upbeat real-estate news, in some markets residential real estate is akin to the Nasdaq index in March of 2000: It's ready to pop like a balloon hitting a hot light bulb.

First, the bad news-and how it impacts real estate: If slack business and consumer spending drag the economy down further, it will depress real-estate prices.

There are numerous signs that make residential real estate an especially dangerous investment now, although you can protect your net worth by taking a few precautions. First, you need to face some emerging facts.

There's plenty of evidence to suggest that the U.S. hasn't climbed out of its economic crevasse.

As measured by the Gross Domestic Product, the U.S. economy rose at a 3.1 percent annual rate in the third quarter, according to the U.S. Commerce Department. A Bloomberg survey of economists had forecast 3.7 percent growth.

Add in declining factory orders and a nine-year low in consumer confidence, and you have some dark economic clouds moving in.

In October alone, some 7,600 job cuts were announced each day, according to the outplacement firm Challenger, Gray & Christmas. And real estate, like politics, is always a local matter. If local employers are making substantial job cuts, that always has a strong impact on real estate. Large numbers of homeowners who have been unemployed for a year or more are likely to sell their homes, which will depress local residential prices.

Finding what they believed was their ace in the hole, homeowners may have overinvested in local real estate in lieu of their sagging 401(k) stock plans. The result may be dozens of local price bubbles ready to burst.

Some guidance is provided by the Office of Federal Housing Enterprise Oversight, or OFHEO, an obscure U.S. agency that monitors the financial safety of the quasi-government loan corporations Freddie Mac and Fannie Mae.

An OFHEO survey covering U.S. home prices through June 30 found 20 markets with price increases ranging from 11 percent to 15 percent.

The top five markets were Yolo, Calif.; Barnstable and Yarmouth, Mass.; Santa Barbara, Calif.; Nassau and Suffolk counties in New York; and Fort Lauderdale, Fla.

You can see the entire list at http://www.ofheo.gov in its "Second Quarter 2002 House Price Index."

Are these bubble markets? There are lots of other factors to consider, so the jury's still out.

The key to spotting a potential bubble involves common sense.

Have real-estate prices in your area risen much faster than area job growth, local corporate spending and the average 6.48 annual home-price increase as measured by OFHEO?

There are steps you can take to prepare yourself if a real-estate bubble is hovering over your neighborhood:

· Beware of taking out equity, as it leaves you with less of a base if you have to obtain a home-equity loan and raises your total debt payments. Say you have a $350,000, 30-year mortgage at 7.25 percent and refinance it at the same term at 6.25 percent. You take out 20 percent of your equity, or $70,000. That raises the principal to $420,000. Over 30 years, you'll be paying $71,422 more in total principal and interest payments, according to the Bloomberg.com mortgage calculator.

· If you're buying a new property, remodeling or taking out cash after a refinancing, you need to keep an eye on local real-estate trends. You may not want to invest-or possibly sell-if you're seeing a slowing local economy.

Martin Weiss, president of Weiss Research, a consumer research firm, points out that real-estate bubbles are most perilous to people living in areas where there's an imbalance between rising home prices and declining job markets.

"You'll see prices decline in bedroom communities, where prices are most manic," he said.

Lower mortgage rates, ironically, pushed millions away from debt reduction and further into hock when they cashed out some $139 billion in equity during the past two years, according to Freddie Mac.

Paul Kasriel, chief of economic research for the Northern Trust Bank, notes that with household debt rising to postwar highs in the third quarter, millions of homeowners are stretched to the limit despite lower finance rates.

"The Federal Reserve encouraged people to go deeper into debt and invest in real estate," Mr. Kasriel said. "Unless you can find a better investment than your home, just leave your equity alone."

Reducing your real-estate debt gives you flexibility by reducing the pressure to earn a higher income and by allowing you to be debt-free at a younger age.

It doesn't matter what the new Congress will do to stimulate the economy, because your personal debt holds much more sway over your life-and all economy is local.

-Edited by Karina Lahni