A foreclosure action takes longer to go through the litigation process, particularly if it is contested. Many banks are reluctant to push foreclosures because that pushes them closer to the day when they have the real estate back on their books and would be forced to replace the value of the mortgage (which as we all know is inflated above current true value) with the new "book" value of the real estate.
The banks understandably do not want to realize a loss; however, that day of reckoning can only be delayed and not avoided. There will be a time when the banks or investors who bought bundles of mortgages (through mortgage-backed securities) want a return on their investment. A house in foreclosure produces no income; someone is losing money (either the bank or the mortgage-backed security which "owns" the mortgage). And moving homes through foreclosure gets them to a point where someone, at some price, will buy a property. The mortgage holder will lose money on the value, but at least the ongoing total loss represented by the zero income from a defaulting borrower will stop.
For these reasons, there is a foreclosure pipeline jammed with properties not producing income. These properties may inch along like toxic sludge, but they will move. At some point, investors or banks will want to take anything they can in a foreclosure sale in order to stop the loss. Depending on the magnitude of the foreclosures swamping the market and flooding it with supply, prices may have to plunge precipitiously just to meet the point where demand matches supply. In this way, the fire sale panic to unload unproductive properties may yield market prices far, far below current levels, never mind the levels of 2006-07.
Throw in the other factors that could affect real estate across the country -- factors to which the New York metropolitan area would hardly be immune -- and you can see how easily home values could drop like the proverbial stone.