Challenges Ahead for Manhattan’s Red-Hot Condo Market

In March 2025, Peter Zaitzeff, a licensed real estate broker and the director of new development sales at SERHANT, sold a spread at Manhattan’s 150 Charles Street for $60 million, the highest price ever for a downtown condominium. 

But, while the sale surpassed a milestone that had stood for seven years, Zaitzeff’s mark was eclipsed by year’s end, with an $87.5 million sale at 140 Jane Street in August. (A $129 million sale at the condo building at 80 Clarkson Street followed in December, but that was for multiple units.)

“It speaks to the amount of confidence buyers have, especially after my sale,” said Zaitzeff. “People are like, ‘You know what? $10,000 a square foot is not crazy.’ It gave people [permission], like, ‘I can spend $10,000 a foot because somebody else did.’ Once you break those records, it gives greater confidence to people who can afford that number.”

If you’re wondering about the current strength of Manhattan condo sales toward the top of the market, rest assured that it’s going gangbusters.

“I don’t think we’ve seen a stronger eight, 10, 12 months previously. I started in the business around 2011, and I haven’t seen a stronger, more healthy market. We’re seeing 25, 30, 35 contracts above $4 million per week for the last six months,” said Zaitzeff, referring to figures from the Olshan Luxury Market Report, which tracks residential sales in Manhattan over $4 million.

By most accounts, 2025 was a strong year for condo sales in Manhattan overall, assisted toward the end by the Federal Reserve’s three interest rate cuts. 

A Brown Harris Stevens report said that in 2025, “sales climbed to their highest level since 2022” in Manhattan’s residential real estate market overall, in part due to New York City’s economy “outperforming the nation over the past two years — and expected to do so again in 2026.”

The company noted that the median sales price for condominiums in the borough — reflecting prices in the middle of the data set — rose from $1.65 million in the fourth quarter of 2024 to $1.69 million a year later. Average condo prices — calculated to include the extreme highs and lows — rose accordingly, from $2,994,708 to $3,046,461.

Wei Min Tan, associate real estate broker at R New York, noted that the three interest rate cuts in 2025 gave a boost to the lower end of the market by helping reduce mortgage costs.

“Rates going down was going to help the more entry-level buyers and those at lower price points — let’s say $3 million and below,” said Tan.

To that end, Jonathan Miller, president and CEO of appraiser Miller Samuel, noted that while there was growth in Manhattan condo sales in 2025, co-op sales, at considerably lower average and median price ranges, jumped by twice as much.

“Condo sales rose year-over-year 3.4 percent, and co-ops rose 7 percent,” said Miller. “The reason for the difference is that the median price of co-ops is $825,000, and the median price of condos in Manhattan is $1,661,000, so they’re effectively double.”

Miller said, then, that the decline in interest rates by year’s end gave co-op buyers a boost.

“Because of their lower price point, co-ops tend to reflect a buyer pool that is more reliant on mortgage rates,” said Miller. “Whereas condo buyers tend to have a higher share of cash buyers.”

Reflecting the differential, cash buyers represented 57 percent of the co-op market, but 74.4 percent of the condo market, Miller said. 

On the condo side, those cash buyers were spending an awful lot of it. As much as lower rates assisted buyers on the lower end, the higher end has seen far more frantic activity. 

“Some of the downward movement in mortgage rates is definitely getting people who had been playing a wait-and-see game to come back into the market,” said Ryan Schleis, senior vice president of research and analytics for the Corcoran Group and Corcoran Sunshine Marketing Group. “We’re really seeing a lot of strength at the high end. Deals over $5 million have been super strong, and tight supply is influencing the market a lot. When something new comes to market that people are excited about, a great product that’s priced well, they’re selling really fast.”

By way of example, Schleis mentioned 1122 Madison Avenue, a condominium building still under construction where the duplex penthouse — with 9,350 square feet of indoor space and 1,982 square feet of outdoor space, including a rooftop terrace with Central Park views — sold in late February 2026 for $89.5 million, the highest overall price and price per square foot ever for a condominium in the Upper East Side, according to developers Legion Investment Group and Nahla Capital. 

The Wall Street Journal, which also cited 1122 Madison as the highest residential price achieved so far in 2026, noted in late February that “since sales launched in January, 18 of the building’s 26 units have gone into contract,” and that the developers had raised prices four times.

Corcoran Sunshine has the exclusive listing on the building.

“We just put a few more apartments in contract there, and I think we’re down to just two left,” Schleis said of the building, which isn’t expected to be completed and occupied until fall 2027. “It’s really tapped into this trend of very tight supply at some of the most prime, in-demand locations. When you finally get new product, people are really coming out of the woodwork.”

Zaitzeff noted that 1122 Madison Avenue — which the developers have said sold for an average of more than $5,400 per square foot for the first 18 units —  is not the only exciting new development property to attract never-before-seen prices.

“When A-plus inventory is on the market, those things sell quite quickly,” said Zaitzeff. “Look at 80 Clarkson, the newest building downtown. They just reported that they’ve hit $1 billion in sales. They still have more to do, because the total sellout is $3 billion. But they’re achieving between $7,000 and $10,000 per square foot. These are numbers we never saw before below 34th Street.” 

But if the high end of the new development condo market is brimming with good news several months into 2026, a broader consideration of condo sales performance over the past several months shows a different, more complex and potentially depressing picture due to several external factors, including one that could carry over throughout the year and maybe beyond. 

Gregory Heym, executive vice president and chief economist at Brown Harris Stevens Residential Sales, said he believes the brutally cold New York City winter has dampened the market over the past few months.

“Contracts have been a little depressed, and I think the weather’s had a lot to do with that, as it has with so many other parts of the economy,” said Heym.

But, if the weather has been a minor obstacle for condo sales, the market faces more extreme potential threats due to the war in Iran.

While it’s impossible to know how long the war will last — and therefore how badly it could affect various aspects of the economy, especially energy costs — Miller said he believes the war is already depressing buying activity, and could have more dire effects down the road if the conflict continues for a significant length of time.

“There has been a pause, or a pullback, in contract activity because of the Iran war in the neighborhood of what appears to be about 5 to 7 percent,” said Miller. “This is distorting our understanding of what 2026 is going to look like compared to the same period last year.”

Part of this, said Miller, is that the sudden instability of oil prices leaves the 30-year mortgage rate “sort of stuck” above 6 percent. This is a problem not only on the sales front, but for inventory as well.

“I think higher interest rates are going to continue to reduce the inflow of new development into the housing market,” said Miller. “And I think what we may see when the dust settles on 2026 is more price growth in new development than resales.”

Schleis said Corcoran Sunshine has been seeing “very solid, average levels of activity week in and week out.” But he also said the firm has been seeing a decrease in international buyers in New York City for around six months, one that is not being helped by the recent military conflict.

“In general, it’s due to global events and general immigration policy in the U.S. — people being a bit more concerned about the ease of their travel back and forth between here and wherever they’re from,” said Schleis. “Historically, this number varies depending on what’s for sale and what is happening in the world, but we might see 20 to 30 percent of new development buyers being international. As of late, that number’s been under 10 percent.”

On the other side of the buying equation, any temporary reduction in the size of the buyer pool won’t be nearly enough to mitigate the coming supply shortage when it comes to New York City condos, as inventory is projected to shrink rapidly.    

Zaitzeff said he believes this partly explains the strong recent sales at the upper end of the market, as people seek to buy while there is still enough inventory to give them a variety of options.

“We’ve seen a lot of the smarter money buy right now because they know that in a year or two we’re going to have virtually no inventory,” said Zaitzeff.

The problem has been masked, said Schleis, by the fact that certain desirable new development buildings still have a number of unsold units. This is misleading, he said.

“A huge proportion of what is unsold in new development is contained in just a handful of buildings,” said Schleis. “The last time we ran these numbers, around a third of the unsold new development in Manhattan was in only six buildings, out of the 100 new development buildings that have some unsold inventory in the entire borough. So a lot of the inventory is concentrated. If you take that out, we’re already in an extremely tight inventory condition, and that’s why some of these new buildings are selling really, really quickly.”

Corcoran Sunshine believes that the supply versus demand imbalance will soon be impossible to ignore.

“We’re predicting that there are about 500 fewer units projected to enter the market than what we typically sell,” said Schleis. “So every year, over the next few years, you’re likely to see the new development inventory — which stands at about 3,000 unsold apartments, roughly speaking, in Manhattan — decline by 500 units. That’s going to get really tight, and we’re going to quickly be back to the ultra-low inventory we last had around 2013.”

Zaitzeff said he believes the government needs to take supportive action to get developers building again. That includes New York State lawmakers resurrecting something akin to the 421a development tax incentive that expired in 2022.

“You’ve got to have some tax incentives and deregulation for developers to build again,” said Zaitzeff. “All the construction lending dried up after COVID and the 421a tax abatements went out, so developers are not incentivized to build anymore. By the end of 2027 there’s going to be nothing available in new development inventory. Resale prices will go through the roof.”

And, given the uncertainty surrounding the war, Miller foresees a near future in which the collapse in supply creates “a shock to the condo development market, where pricing is going to be much higher.”

“I remember talking to a top-level executive at a national lender,” said Miller. “I asked, ‘How do you think about inflation and mortgage rates — how do you anticipate?’ And the answer was, ‘It’s all about energy prices.’ What’s going on in the Strait of Hormuz and in the Middle East is the specter overlying the potential for new development volume to increase over the next couple of years. And the coming downturn over the next two years is going to create a price premium that’s going to become distorted because of the spike in interest rates.”

Asked how high he believes prices can go, Miller notes that the median price for new development condos is currently around $2.5 million, and said he wouldn’t be surprised if “in a year it could exceed the $3 million threshold and beyond.”

For now, though, brokerages are working hard to sell the inventory that is there, and brokers see rich potential for high-priced sales in the immediate future before having to worry about the supply shortage to come.

“We’re entering into our peak selling season of March, April and May, and we’re getting great traffic on our sites,” said Schleis. “Brokers I talk to are feeling very positive. They’ve got buyers. So I think it’s going to be a strong spring.”

Larry Getlen can be reached at lgetlen@commercialobserver.com.