How Rising Mortgage Rates Impact NYC’s Resi Market

A 7 percent mortgage rate would normally be enough to throw cold water on a housing market.

In New York City, it’s widening the gap between buyers who can shrug off higher borrowing costs and those who can’t.

The average rate on a 30-year fixed mortgage climbed above 7 percent for the first time in more than two years, putting a damper on what New York City brokers had hoped would be a strong fall selling season. But with inventory scarce and roughly half of Manhattan deals closing all-cash, higher rates haven’t totally killed demand. Instead, agents say they’re putting pressure on the middle and low ends of the market, while wealthy buyers compete for the best homes.

Supply across the city fell 5 percent last month, compared to August 2025, according to a StreetEasy report. That dip, more pronounced in Manhattan, helped fuel a spike in competition for homes, with one in five properties trading for more than their last asking price.

“The biggest challenge we have right now is lack of inventory and lack of good inventory,” said Douglas Elliman’s Michelle Griffith. “If the perfect apartment hits the market, they’re going to buy that regardless of the rate,” especially, she added, as rates have been climbing for weeks and were already at elevated levels before then.

That dynamic could insulate New York from some of the slowdown higher mortgage rates might otherwise cause. Roughly half of the deals signed in Manhattan are all-cash, and agents say competition for desirable properties remains fierce enough that sellers haven’t yet had to adjust their expectations.

“In a vacuum, if it wasn’t about demand necessarily but purely [mortgage] rates, the cost of owning something is going to put some downward pressure,” said Donald Brennan, broker owner of Engel & Völkers in New York City. However, “the demand is equal to or exceeding supply, and it’s cancelling that out.”

Even before mortgage rates crossed 7 percent, the city’s luxury market was pulling away. In August, contracts for homes asking at least $5 million in Manhattan rose 13 percent, while contracts for the rest of the market fell 7 percent, according to a report from Corcoran.

Agents say rising mortgage rates will only exacerbate the divide between the haves and the have-nots, which in New York means people buying $3 million homes.

“I am the busiest at the top part of my price point right now” said Ian Slater, co-founder of Trove Partners at Compass. “But the middle of the market has become very slow — like, remarkably slow.”

Slater is already seeing some casualties. He has a client who signed a deal for a $5.5 million condo three weeks ago. The contract included a mortgage contingency capped at 6 percent. Now, Slater says, that deal is likely to fall apart.

When his client inked the contract, finding a 6 percent rate seemed realistic, especially before the Fed’s rate hike.

“That ship has sailed,” Slater said.

Other buyers are trying to recalibrate the math by pushing on price. Serhant’s Peter Zaitzeff had an investor try to renegotiate a deal for a condo at 111 Murray down from $4.125 million to $4 million after interest rates rose earlier this week, claiming that their carrying costs would be too high.

“It’s definitely not helping the mid-tier of the market,” he said.

The squeeze gets more acute further down the price ladder, particularly for first-time buyers looking to enter the sales market amid skyrocketing rent prices in the city, said Elliman’s Ben Jacobs.

“The delta between buying and renting might change with a 7 percent mortgage rate, but I don’t think it’ll change immediately,” Jacobs said. “Now the cost of buying is more expensive, and there’s an unprecedented rental market. You gotta feel for buyers in that category.”

Serhant’s Kayla Lee said she’s been contending with those concerns from prospective buyers at the Paragon in Long Island City, where she heads sales.

“I have a lot of first-time buyers who are rate sensitive because of their budgets, and they want to pause and wait,” Lee said.

But she tells them a refrain she’s been repeating for years now, since rates began climbing in the wake of the pandemic.

“Rates aren’t going to come down any time soon to a level that you’re going to love, whether you purchase now or in a year,” she added. “Do you want to miss out on the property you love or worry about refinancing later?”