New York City brokers’ confidence in the residential and commercial real estate markets took a slight dip in the second quarter of 2015, according to the Real Estate Board of New York’s latest Broker Confidence Index released today. While broker views on the market have been relatively stable over the last two years and not fluctuating more than half a point, the cautious tone resulting from this quarter’s survey is attributed to uncertainty over interest rates, primarily among residential brokers, as well as continued concerns about a lack of inventory.
The Overall Broker Confidence Index for the second quarter of 2015 was 8.84, a slight drop from last quarter’s 9.05 and virtually unchanged from a year ago. Despite the dip in the overall index this quarter, brokers’ perceptions of the market continue to lean positive.
“Our survey found that brokers are slightly less confident in the market six months from now, which is largely due to interest rates. This seems to be a more significant concern for the residential brokers whose activity is more directly impacted by changes in rates,” said John Banks, REBNY President.
The Commercial Broker Confidence Index was 9.47, a slight increase from last quarter’s 9.24. Likewise, the Commercial Broker Confidence Index in the market six months from now was 9.10, up from last quarter’s 8.92. Brokers gave credit to employment growth as a key factor for their positive outlook on the market. Anticipation of an interest rate increase in the future and uncertainty about some aspects of the global economy, particularly the Greek and Chinese economies, were the key concerns cited as impacting their confidence in the market six months from now.
One commercial broker said, “Job growth continues to be the most significant driver of future market performance. [The] market is ‘cooling’ a bit, but there is still velocity (and urgency).”
Another commercial broker added, “The future of the markets will be strongly influenced, as it always is, by where rates go. For the next six months, I believe that they will not be high enough to significantly slow the market.” Yet, another noted, “Geopolitical issues could slow down the world economy short term.”
The Residential Broker Confidence Index decreased to 8.21 from 8.86 last quarter. Again, the issue of concern cited most was the lack of inventory. This, and particularly the low inventory of two bedroom apartments, has been an ongoing concern for the past year and a half. Despite this consistent concern, residential broker confidence continues to remain high. Likewise, the uncertainty of interest rates left many residential brokers unsure of the market six months from now. Confidence in the market six months from now dipped to 7.93, from 8.82 last quarter. This has been the lowest index for the market six months from now since reporting began in 2013.
Despite the reduction in confidence in the market six months from now, brokers were positive about robust sales volume, the growing popularity of new neighborhoods, and increased demand, especially in Brooklyn and Queens. They anticipate that this popularity will result in a strong pick-up in new development and increased inventory in the long run.
One residential broker remarked, “Increased interest rates will impact the economic environment.”
While another explained, “A sustained rise in interest rates and/or a slowing in the flow of Chinese capital into the U.S., particularly in New York City, would have a dampening effect on the residential market.”
Yet another residential broker offered, “Sales are strong due to lack of inventory, especially the condominium market.”
REBNY’s Broker Confidence Index is a collection of responses from an online survey given to REBNY’s residential and commercial brokerage division members.