Buyers are still wary, sellers are still stubborn, and yet somehow, the market moves. Eventually, at least. But unlike previous boom-bust cycles, the changes ahead may have less to do with rate cuts, Wall Street performance, or rental trends, and more to do with individual buyers and sellers.
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With a new year upon us, the Manhattan and Brooklyn real estate markets find themselves at a familiar crossroads: poised between uncertainty and revival.
Buyers are still wary, sellers are still stubborn, and yet somehow, the market moves. Eventually, at least. But unlike previous boom-bust cycles, the changes ahead may have less to do with rate cuts, Wall Street performance, or rental trends, and more to do with individual buyers and sellers.
So what could shape the market next year? Here are six predictions as to what could define New York City real estate in 2026:
- Rate cuts won’t fuel a buyer surge, but they’ll finally unfreeze locked-in sellers
- Asset prices, including real estate, could rally — even if the fundamentals don’t
- Seasonal timing will become more critical than pricing alone
- Rents will stay high as landlord incentives stay low
- Unrenovated co-ops will mount a quiet comeback
- Brooklyn will absorb rising inventory without losing its pricing power
1. Rate cuts won’t fuel a buyer surge
A common belief is that falling interest rates incentivize buyers to leap back into the market. That’s half true. But while low rates are an incentive to buy, they require the right environment. If mortgage rates decline on the back of Fed cuts due to economic weakness, buyers may actually pause. Recession risk dampens the confidence for big purchases, even if mortgage math improves.
Crucially, however, if rates fall due to a “normalization” narrative (slower inflation, steady employment, soft landing), the combination of increased confidence and affordability will draw in marginal buyers who may have balked at a purchase earlier.
Most importantly, falling rates may finally thaw out the seller freeze. Many homeowners are stuck in 3% mortgage purgatory, unwilling to trade into a higher payment. In fact, nearly 70% of all U.S. mortgages still carry rates below 5%, and nearly 52% are below 4% (!) according to recent data from Realtor.com.
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Hence, so many sellers have stayed frozen on the sidelines: they’re locked into amazingly low borrowing costs that are simply too good to give up. While time will erode that, even slightly lower rates could spur the release of that locked-in supply, particularly in tight markets like Manhattan. This could both give buyers something to actually buy and also provide additional demand from those trading up
2. Asset prices, including real estate, could rally in 2026
Despite constant warnings of a correction, assets, including real estate, could continue to rally in 2026. Markets are still being buoyed by a responsive Fed and a credit market that remains unusually calm, at least on the surface. As long as credit spreads remain low and steady, investors will continue to seek yield. Against that backdrop, expect continued “risk-on” behavior, even if the fundamentals don’t justify it forever. The “melt-up before the mess” scenario could be in play.
This is a possible market path, given what we have seen in the AI sector, cryptocurrency, commodities, and now precious metals. While some U.S. real estate markets, notably in the SunBelt, have seen extended price declines since 2022, inventory-constrained regions like Manhattan are holding steady. Regional divergence is key.
3. Seasonal timing will become more critical than pricing alone
In a flat market, first impressions matter. Assuming you’re priced correctly, hitting the market at peak seasonality helps achieve day-one pricing success before buyer fatigue or price cuts creep in. The Manhattan and Brooklyn sales markets haven’t had sustained momentum in years. Even though rents are up, affordability has kept many would-be buyers on the sidelines.
That lack of marginal buyers means sellers have to work with what the market gives them, and that is best found in seasonality. In 2026, the spring (March–May) and fall (late September–early November) could be the only periods when listings get real attention and see buyer competition. Summer and winter? Not so much.
4. Rents will stay high as landlord incentives stay low
The rental market remains tight due to constrained supply. In response to the regulatory landscape, many landlords aren’t upgrading, investors aren’t buying, and new supply is minimal. All of that leads to upward rent pressure, which shows no signs of slowing. Plus, with mortgage rates at current levels and down payment requirements, renting remains more economically viable than buying, which acts as a drag on the sales market. With that dynamic unlikely to change, expect rents to stay.
5. Unrenovated co-ops will mount a quiet comeback
I’m going out on a limb with this one, but the humble, unloved, unrenovated co-op could be the comeback story this year.
Quick background: often sellers see their years of ownership as a patina, not a blemish. What they may see as a simple cosmetic refresh, buyers see as a $500,000 renovation and a year of temporary housing. That perception gap has suppressed demand for unrenovated units, but in 2026, the discount may be too large to ignore.
There are a couple of reasons for this. First, after years of buyers demanding move-in-ready everything and paying a premium to avoid renovations, that tide may be turning. Buyers who are patient, value-driven, and willing to live through a renovation have always been able to find the best deals in these older units, and they could find a bid in a market defined by tight supply and stubborn prices.
In addition to the value angle, another reason unrenovated co-ops could see more interest this year is the dwindling supply of new development units. For luxury buyers who can’t find what they want, the opportunity to renovate a well-located co-op could prove to be an interesting proposition.
In both of these situations, an arbitrage opportunity exists. If the market is penalizing unrenovated units by $500,000, but an efficient renovation can be completed for $350,000, that’s a $150,000 value gap waiting to be claimed. The opportunity is real for those who can stomach the process, and 2026 might be the year it’s realized.
6. Brooklyn will absorb rising inventory without losing its pricing power
While some Manhattan sellers are contemplating trades below their previous sale prices, Brooklyn sellers may fare differently.
Thanks to strong value creation over the last decade, Brooklyn prices have held up better, even with added supply on the horizon. In 2026, more inventory may hit the market, but prices should hold. While this obviously doesn’t cover every situation in every market at every price point, Brooklyn has consistently shown its ability to absorb listings. Even a moderate influx of demand would likely re-create competitive scenarios, which could push prices higher.