New York City real estate brokers reported a dip in confidence in the current real estate market in the third quarter of 2013 compared to the last quarter due to concerns about residential inventory and political uncertainty.
The city’s brokers also lowered expectations for their six-month outlook, even though they reported strong confidence in present financing conditions, according to the Real Estate Board of New York’s (REBNY’s) Real Estate Broker Confidence Index released on Monday.
The Overall Broker Confidence Index decreased to 8.75 in the third quarter from 8.89 last quarter chiefly on concerns among residential brokers that new development for ultra high-end dwellings is making the creation of new inventory for middle-class renters and buyers more difficult.
Uncertainty on how political gridlock in Washington D.C., including the recent government shutdown and the debt ceiling debate, will impact the trajectory of interest rates also contributed to less market confidence going forward.
“New York City remains one of the most prosperous and dynamic real estate markets in the world. We’re seeing strong and steady demand for both residential and commercial properties, while financing for deals continues to improve from the downturn,” said
Steven Spinola, REBNY President.
“That being said, there are political headwinds like another government standstill that could disrupt market confidence especially if it triggers a sudden and rapid rise in short-term interest rates.”
The Residential Overall Confidence Index decreased to 8.33 in the third quarter from 8.71 the previous quarter. Despite inventory concerns, residential brokers were hopeful that more developments and the resumption of projects stalled during the recession will come out of the pipeline catering to a wider spectrum of income earners and elevate the economy.
“Unfortunately, it seems that future confidence in the real estate market is being eroded by political uncertainty in Washington,” said Eric Anton, a managing partner at Brookfield Financial who responded to the survey. “Most people think that in a few months there could be another showdown over spending and the debt ceiling.”
The Overall Present Situation Index within the Commercial market showed an increase in confidence, recording 9.77 in the third quarter, up from 9.28 last quarter. Brokers remained positive about the current financing market and commercial real estate leasing market, despite a slowing down of activity in the retail sector.
“The NYC investment sales market is at unprecedented levels. The average price per square foot in Manhattan is approaching $1,000, which is 50 percent higher than 2010 levels,” said James Nelson, a partner at Massey Knakal Realty Services and survey respondent. “We believe this is a direct correlation to the lack of supply that is not meeting global demand.”