The Great Housing Reset

The Weekly Recap

Good morning and happy Friday! Its almost ‘lets circle back’ in the New Year season, a home at 80 Clarkson just went into contract for $129 million the first 9 figure deal in the history of downtown NYC. Rental inflation is down MoM and YoY as overall inflation unexpectedly cooled in November. Wall Street saw its 2nd best year in the last 25 with over $4.5 Trillion in M&A activity for 2025. Oil has hit a four year low, Google will now be competing with Zillow by advertising homes and the unexpected neighborhood with new restaurant hot spots is Hudson Yards.

If you missed last weeks newsletter Federal Reserve Cut Rates Again and Announced an Unexpected Move, you can read that through the link.

The Great Housing Reset

For the past two years, buyers have been forced to recalibrate their expectations around higher borrowing costs, tighter affordability, and a slower pace of decision-making. Now, the adjustment baton is being passed. Sellers are increasingly confronting a new reality as well, pricing power is no longer guaranteed. The market isn’t broken, it’s resetting. For sellers understanding this shift is the difference between stalled listings and successful closings. These price corrections and shifts to the marketplace are having downstream effects on other aspects of real estate.

Nowhere is this reset more visible than in commercial-to-residential conversions. After the pandemic reshaped work, office vacancy surged to over 20%, up from just 11.1% in 2019, according to Cushman & Wakefield. In response, state legislators approved new tax abatements last year to accelerate conversions. As many as 25 future office conversion projects, totaling roughly 8.8 million square feet, are already in planning stages across Manhattan, signaling a structural rebalancing of supply rather than a temporary disruption.

On the residential rental side, supply dynamics are sharing similar sentiments as national multifamily vacancy hit 7.2% in November, the highest level on record. While the historic construction surge of recent years is slowing, a substantial pipeline of new units continues to deliver into a market facing softer demand. This imbalance is forcing landlords and investors to rethink pricing, concessions, and long-term assumptions.

This reset is also playing out beyond housing. In 2025, dealmaking surged across global M&A markets as companies, private equity, and family offices leaned into repricing opportunities created by volatility. As valuations normalized and capital markets stabilized, strategic buyers stepped back in with conviction, driving a sharp rebound in transaction volume. That resurgence in M&A activity underscores a broader theme, that periods of reset don’t freeze capital, they redirect it. This signals renewed confidence among sophisticated players and smart money who view transitional markets as moments to deploy, not retreat.

The Great Housing Reset is about normalization. Supply is finding equilibrium, pricing is becoming more rational, and opportunity is emerging for those who adapt early. Buyers, Sellers and Investors who position themselves as market interpreters rather than market wanderlusts will win in the short, medium and long term. In a reset, those who thrive are the ones who evolve with it.

Market Performance

Here are how some other indexes and asset classes have performed as of this morning’s opening bell.

NYC Market Update

Here is a view of NYC market activity over the past week.

Mortgage Rate Update

The average 30-year fixed-rate mortgage has remained within a narrow 10-basis point range over the last two months. With rates down half a percentage point over the last year, purchase applications are up 10% above the same time one year ago.

News You Can Use

• Bond Market Debate Over Fed’s Path in 2026 About to Heat Up Bloomberg

• Fed Decisions Distorted By ‘Phantom Inflation’ Financial Times

• Zillow Shares Get Crushed as Google Announces Home Searching Options CNBC

• Warner Brothers is Blockbuster Finale to $4.5 Trillion M&A Haul Bloomberg

• Oil Prices Fall to Four-Year Low Below $55 a Barrel Yahoo Finance

• Wall Street’s AI Adoption Is Set to Drive Hiring Boom, For Now Bloomberg

• JP Morgan Pulls $350 Billion from Federal Reserve to Buy Up Treasuries Yahoo Finance

• NYC’s Hudson Square Is Home to a Thriving New Restaurant Scene NY Post

• Downtown Just Saw its First $100 Million Plus Home Sale in History NY Post

The Deep Insight

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