These past two quarters of 2026 have been extremely productive in the real estate sector. The big question is: “Will this continue into the spring selling season?”
The biggest variables remain New York City policy changes, elevated mortgage rates, and broader global uncertainty.
While I touched upon this in my last newsletter, I think the most obvious concerns will continue to be NYC policy changes in conjunction with mortgage rates.
Though Mamdani has proposed a 2% “millionaire tax” on incomes above $1 million to help close New York City’s $5.4 billion budget gap, the city cannot enact such a measure on its own. It would require approval from the State Legislature and Governor Hochul, who has expressed opposition, making passage uncertain.
If the state does not approve the income tax, the mayor’s fallback is a proposed 9.5% increase in NYC property taxes, which could be enacted locally by the June 30th budget deadline. Once adopted, the new property tax rate becomes effective for the fiscal year, impacting nearly three million residential units and over 100,000 commercial buildings across NYC.
For condo/co-op buyers, this change translates into higher common charges (condos) and higher maintenance fees (co-ops). It also puts pressure on cap rates for rental buildings.
However, a “hidden third lever” option — now gaining traction in both Albany and City Hall — is a hybrid approach that closes the gap without major tax increases. It relies on a combination of general reserves, state aid, and internal cost reductions.
The mayor’s preliminary budget already assumes nearly $1 billion from the “Rainy Day Fund” and additional reserves to help balance the books. These funds were built after the 1970s fiscal crisis precisely for situations like this.
Governor Hochul has already signaled $1.5 billion in assistance for NYC over two years. State legislators are also proposing targeted taxes on corporations and ultra-wealthy residents that could send several billion dollars to NYC, potentially filling most of the gap. This approach allows Albany to help NYC without approving Mamdani’s specific millionaire tax plan.
Some City Council leaders argue the gap does not warrant tapping rainy-day funds and instead push for efficiencies, such as eliminating long-term vacant positions and agency cuts, which could generate about $1.7 billion in savings without new taxes. NYC agencies are already being instructed to identify savings to cut spending.
The likelihood of the 2% millionaire tax being approved is low to moderate, whereas the 9.5% property tax hike scenario is slightly higher. The third lever option — a compromise that avoids new tax hikes — is now being discussed publicly and gaining traction, for three main reasons: Hochul doesn’t want a “tax-the-rich” headline going into an election. The City Council isn’t eager to push through a major property tax hike. And while Mamdani is focused on generating revenue, he still needs to balance the budget.
Ultimately, this hybrid approach would have a far more muted impact on real estate, especially at the high end.
Beyond local policy, global economic pressures and interest rates will shape the market. Mortgage rates for 30-year fixed loans are now hovering in the 6%–6.5% range, depending on the borrower and structure. While rates have edged up slightly from their recent lows, many lenders are still offering options in the high-5% range, suggesting we may be settling into a more workable and predictable environment for buyers.
Rather than a sharp shift, we’re seeing a market that is beginning to find its footing — offering buyers more clarity and the potential to re-engage with greater confidence, helping them break through an affordable barrier.
Overall, buyers, sellers, and investors remain optimistic. However, some are sidelined by fears of volatility. At the same time, international demand continues to support the market, reinforcing New York’s global appeal.
One of the big concerns that looms over New York City was highlighted in a recent Politico piece, signaling a worrisome sign: “Moody’s, the bond rating agency, revised its fiscal outlook for New York City from ‘stable’ to ‘negative.’ It suggests Moody’s could eventually downgrade the city if its fiscal situation isn’t rectified.”
As always, many moving parts will determine whether the upcoming months are a boon or a bust for real estate.
To recap: Looking ahead, one of the key factors to watch will be how Mamdani and Hochul ultimately align on closing the budget gap. There’s a real opportunity here for a thoughtful compromise — one that balances fiscal responsibility with economic growth and keeps New York City competitive on a global stage.
If approached strategically, this moment could reinforce the city’s long-standing strength: its ability to adapt, attract capital, and remain a place where both investment and innovation thrive.
For real estate, the focus should remain on preserving and enhancing New York’s status as a world-class market. History has shown that when the city leans into smart policy and long-term thinking, it not only protects value — it creates it.
This is less about risk and more about execution. If leadership gets it right, New York is well-positioned to continue its upward trajectory.
It remains to be seen which path will be chosen, but as the days grow longer, we should be getting more clarity on how our local, state, and national political and economic factors will impact real estate for the rest of the year.
