Real estate brokers are jittery over the coming elections, with many concerned about the possible effects of a contentious vote on the city’s economic prospects.
According to the Real Estate Board of New York, its Broker Confidence Index for the first quarter of 2016 dropped half a point to 7.23 compared to the previous quarter. Brokers also have increasingly dim expectations over the coming six months. The confidence index dropped 0.84 points to 6.73 for the time period.
The figures mark the continuation of a downward slide that has been in place since the fourth quarter of 2014. During that time, the index was at 9.22 and the six-month outlook was at 9.23. That remains the highest point of the index since it was launched in 2013.
“The ongoing transition in our nation’s leadership has contributed to apprehension surrounding decision-making and uncertainty for the future of the real estate market and economy,” said REBNY president John Banks.
“While this builds on concerns about future interest rates and inventory, our brokers maintain a positive outlook overall with healthy market demand and the growth of New York City jobs.”
Commercial real estate brokers were the main source of the sour outlook.
According to REBNY, its Commercial Broker Confidence Index registered a drastic drop to 6.36. During the previous quarter, the figure was 7.88. This marked the first time that the index has gone below 7-point mark.
Commercial brokers also have a pessimistic view of their prospects over the next six months. The confidence index registered a score of 5.55, which amounts to 1.69 drop from 7.24 the previous quarter. This represents the greatest drop in future confidence since REBNY started the survey.
“Uncertainty over the United States presidential election” was one of the main concerns of commercial real estate brokers. Other sources of anxiety include possible interest rate increases, the state of the global economy, the influx of new office spaces and rising asking rents.
Brokers on the residential side are a lot less tense.
The Residential Broker Confidence Index increased by 0.25 to 8.10 quarter-on-quarter. The six-month outlook was similarly rosy, jumping slightly from 7.90 to 7.92. The index attributed the figures to New York City’s strong appeal with buyers and the increase in inventory due to new development units.
The positive outlook of residential real estate brokers may turn out to be unjustified.
According to a 2014 report from the British Journal of Political Science, home sales in 35 states dropped by two-tenths to three-tenths of a percent during election years.
This effect is more pronounced during tight races, with the decline swelling to a third or half of a percentage point.