By Helen Chernikoff

NEW YORK, Jan 5 (Reuters) - Prices of existing Manhattan apartments fell nearly 4 percent in the fourth quarter, two reports showed, and analysts warned of much deeper declines in coming months in the wake of turmoil on Wall Street and financial sector layoffs.

The median sales price -- in which half the sales prices were higher and half were lower -- of an existing Manhattan apartment fell 3.6 percent to $732,500, according to the Prudential Douglas Elliman Manhattan Fourth Quarter Market Overview.

"You could say it started the second week of September when Lehman (Brothers) filed for bankruptcy," said Dottie Herman, chief executive of Prudential Douglas Elliman, one of the United States' largest real estate companies.

"Up until then, New York City was holding its own and after that people were in shock. Things they trusted their whole lives just fell apart."

Herman sees a possible price decline of 20 percent to 25 percent afflicting the entire Manhattan market in the first quarter.

According to the Corcoran/PropertyShark report, median existing sales prices fell 4 percent year over year to $759,000 in the fourth quarter.

Prices of existing homes, also called resale prices, fell in only one other quarter in the past five years, by 1.1 percent in the fourth quarter of 2006, and that was something of a blip, said appraiser Jonathan Miller, author of the Prudential report.

These numbers, on the other hand, are a leading indicator of more declines to come, because resale prices are not susceptible to distortion like sales figures for new construction, in which contracts are signed up to 18 months before the sale is completed.