After largely being stuck in neutral in 2024, the residential market could finally kick into gear next year.
Analysts say buyers seem ready to make peace with the reality that high mortgage interest rates won’t budge significantly anytime soon, despite three notable rate cuts by the Federal Reserve in the past few months.
And if inventory levels rise as sellers inch back into the market, ending the lack-of-supply problem, condo and co-op deal activity could soon enjoy a spark after a somnambulant few months.
“I think people are finally starting to come to terms with the fact that we’re not likely to see 2% rates again in the near future,” said Kenny Lee, StreetEasy’s senior economist. “While it’s difficult to predict where rates will go exactly, I’m expecting a busier spring home shopping season in 2025 than we saw this year or last.”
By some measures, the market has nowhere to go but up. Citywide from January through October, according to StreetEasy data, co-op sales were down 1.3% over the same period in 2023 while condo sales were up 1.4%, incremental shifts that speak to the flatness of the housing economy in New York.
If the cost of home loans has sidelined buyers, it may be understandable: Rates on 30-year mortgages, which are tied to bond markets and generally reflect investors’ mood about economic growth, were around 7% when the year began and have dipped only a bit in the months since. Still, as 2025 approaches, rates have stayed below their recent highs of 8% in fall 2023, and their movement has generally been downward, a favorable sign.
Easing loan costs coupled with a rise in inventory could help prices, a trend already detectable in some statistics. Indeed, Manhattan’s median sale price in the third quarter, roughly $1.1 million, was down about 3% from the year-ago quarter, according to data prepared by the appraisal firm Miller Samuel for brokerage Douglas Elliman.
Unlocking the sales market is expected to spell relief for renters as well. As it is, people who have put off buying appear to be crowding the rental market, putting intense upward pressure on housing costs, which in Manhattan hit a median rent of $4,200 a month in November. That figure was up 5% in a year and represented the second straight month of year-over-year increases, Elliman said at the time.
A coming uptick in rental inventory, especially in Brooklyn and Queens (multifamily construction in Manhattan remains limited) could boost supply and soften prices, brokers say.
Renters are also expected to benefit in 2025 from the FARE Act, passed by the City Council in the fall, which ends the decades-long practice of renters having to fork over broker fees on behalf of their landlords’ agents. They will pay commissions only to their own brokers instead, halving their upfront fees. The new law is expected to put more money in renters’ pockets and stimulate competition, though a few weeks ago the powerful Real Estate Board of New York trade group sued to stop it.
Overall, 2025 could bring smaller but still meaningful market shifts as well. For his part, Lee thinks co-ops, which are generally less expensive than condos but are often avoided because of their stricter rules, will see a bump in the coming months. “Co-ops,” he predicted, “will make a comeback.”
