If Rates Fell, Why Didn’t Activity Rise?
January 2026 came in softer than expected. Contract activity in the New Construction sector trailed the pace of the past several Januarys, signaling a more cautious start to the year.
The Luxury Market (defined as $4M+) reported roughly the same number of signed contracts as last year. However, nearly 10% of those deals were concentrated in one project: 1122 Madison Avenue on the Upper East Side. Without the launch of this prestigious new development, luxury activity would likely have posted a year-over-year decline.
This slowdown is somewhat unexpected given that mortgage rates are nearly 1% lower than they were a year ago. So what’s still holding buyers back? Here are some of the reasons:
Affordability is still a hurdle, even with a 6% rate. It may be lower than the 7 or 8% in the last few years but it’s still high. A lot of buildings have assessments, which further exacerbates the monthly cost burden for buyers
Some would be Move-Up buyers are still locked in their places with 2-4% rates
Economic uncertainty is on many buyers’ minds. One of our buyers decided not to move forward after the contract was out because he wanted to see if the market would go down
The urgency to “upgrade now” is softer than pre-2020 because people seem to have the ability and willingness to think longer on what they want in their lifestyle, thanks in no small part to the sticky nature of WFH
But these buyers remain active:
All cash luxury buyers: new construction projects continue to do well. NYC continues to attract the well heeled
Value minded investors: attractive pricing remains the most effective tool to sellers wishing to move more generic inventory
First time home buyers: sky-high rents provide fundamental support for the housing market. Renters who are tired of the ever increasing rents are looking to own. But they move slower and are much more cautious
Personal Update
January was the first 30 consecutive days since college that I didn’t run at all. I ran throughout my pregnancies up till 2 weeks before giving birth. My dopamine deprived brain was not happy. Really can’t wait for my doctor to either declare that my ACL has healed on its own or fix me with surgery!