A wave of adjustable-rate mortgages (ARMs) originated during the pandemic is about to reset, setting up a surge of forced transactions in Manhattan’s real estate market. According to Jared Antin, executive director at Brown Harris Stevens, this shift will drive sales activity in New York regardless of buyers’ views on prices or Federal Reserve policy.
“The people who had a five or seven-year ARM, those rates are going to come to be adjusted soon,” Antin says. Unlike much of the country, where buyers locked in thirty-year fixed rates and are now reluctant to move, Manhattan’s higher share of ARM borrowers faces a contractual deadline. Their mortgages are set to reset, forcing owners to decide whether to move.
Manhattan’s preference for ARMs is rooted in the city’s unique property market. Shorter holding periods and high property prices make adjustable-rate loans more attractive. Antin notes that, based on conversations with mortgage brokers, a larger share of Manhattan buyers choose ARMs — typically five- or seven-year terms — compared with buyers in other parts of the country.
During the pandemic, ARMs offered a clear financial advantage. With rates at historic lows, buyers could pay less over the initial term by accepting a future rate reset. The widespread assumption was that rates would remain low or even fall further.
That expectation did not hold. As 2026 approaches, the first wave of pandemic-era ARM borrowers — who financed homes in 2020 and 2021 — are nearing their reset dates. “We’re coming on to five and a half to six years after those low rates started with the early days of COVID,” Antin notes.
Across most of the U.S., the real estate market remains sluggish as homeowners cling to low fixed-rate mortgages. Many are locked in at rates of three to four percent, and now face much higher costs if they move. This “lock-in effect” has frozen transaction activity, as few owners are willing to give up their cheap mortgages.
Antin explains the dilemma: “If someone is at a 3% rate, and the market right now is six, that’s double their interest payments basically to move.” This dynamic has led to record gaps between existing and new mortgage rates, giving owners a strong incentive to stay put.
But New York’s ARM-heavy structure bypasses this freeze. As ARMs reset, owners are compelled to act. They must refinance, often at higher rates, or sell, regardless of market conditions. “That’s an important dynamic to get people transacting again and give more fuel into the engine of the New York City Real Estate Market,” Antin says.
What sets this coming shift apart is that it is not based on buyer psychology or economic speculation. ARM resets are contractual. Thousands of borrowers who took out ARMs in 2020 and 2021 will see their rates reset on a fixed schedule over the next 12 to 18 months.
Some will refinance and remain in their homes if they can afford the new terms. Others will choose or be forced to sell. Either way, Antin emphasizes, the process injects liquidity into the market. “That’s going to cause people to sell and buy,” he says. Sellers add to supply, but also become buyers themselves, moving, downsizing, or relocating within the city.
This “mechanical forcing function” will drive transactions in New York City even if buyers are cautious about rising prices. “That lock-in effect that is causing people not to want to move nationally because they have such a low rate is going to start weakening quicker in New York City,” Antin says.
For developers and investors, the upcoming wave of ARM resets presents a rare window. Sales activity will rise not because buyers suddenly become more optimistic, but because mortgage contracts are expiring. This will occur against a backdrop of historically low Manhattan inventory.
Antin believes this combination—rising demand and limited supply—sets the stage for price appreciation, although he stresses that the appreciation is a secondary effect. “If there’s less supply and more demand, that’s an important precursor to be able to start having appreciation in our market,” he says.
He expects the most evident signs of price growth to appear in late 2026 or early 2027. “It’s a 12 to 18-month period to start seeing appreciation,” Antin notes. Some early upward movement began in 2025, but a broad, sustained price increase is likely to show up in national data later.
Most national real estate commentary remains focused on whether the Federal Reserve will cut rates or whether fixed-rate borrowers will eventually refinance. Antin argues that in New York, these factors are less important than the simple mechanics of ARMs resetting.
“Because the holding periods are shorter, more buyers take the adjustable rate mortgages in the city than outside the city,” he says. This creates a structural difference: as pandemic-era ARM originations reach their reset dates, New York’s market will see more forced movement and liquidity than markets dominated by long-term fixed-rate loans.
As the first wave of pandemic-era five-year ARMs resets in 2026, Manhattan’s real estate market will see a surge in both listings and purchases. This activity is driven by mortgage contracts, not by shifts in confidence or national economic policy.
For buyers, sellers, and investors, understanding this timeline is crucial. The following year will bring increased market churn—regardless of whether rates fall or national sentiment improves. While other markets wait for psychology to change, Manhattan’s transactional engine is about to restart on a strict schedule, with ARMs acting as the catalyst.
Explore similar articles from Our Team of Experts.
The real estate technology landscape is undergoing a significant shift as artificial intelligence moves beyond simple task automation toward comprehensive business improvement. At the center...
The Texas residential market is experiencing a fundamental shift as inventory levels climb 35% and traditional market patterns evolve. For cash buyers and real estate investors, these change...
The surge in artificial intelligence infrastructure has created record demand for data centers, but traditional construction methods cannot keep up. Conventional data center builds often tak...
