REBNY president John Banks III
NEW YORK CITY—The Real Estate Board of New York’s gauge on broker confidence reported mixed comfort levels on market conditions at the moment, however both sectors confidence in conditions six months from now have taken a bit of a hit for a variety of reasons.
The REBNY Broker Confidence Index for the first quarter of 2017, which measures the overall broker outlook in both present market conditions and the future real estate market, declined by 0.13 to 5.87. This decline followed the first rise in the confidence index in two years in the fourth quarter of 2016.
This quarter’s decline was fueled by brokers’ shaken confidence in the future real estate market six months from now, which, as measured by the Real Estate Broker Future Confidence Index, declined by 0.27 to 5.7 quarter-over-quarter.
“Our residential and commercial brokers stepped into the first quarter of 2017 with greater confidence, but are proceeding with cautious optimism,” says REBNY President John Banks. “Overall real estate activity in New York City continues at a healthy pace as the market adjusts to the anticipated impact of new inventory.”
The Commercial Broker Confidence Index was 5.28, a decrease of 0.57 from the fourth quarter of 2016. Although confidence in commissions and overall market fundamentals remained high, concerns about the market six months from now weighed on the index. The Commercial Broker Future Confidence Index decreased 0.46 quarter-over-quarter to 4.93.
The REBNY report notes that participating commercial brokers expressed some worry over the market having too much inventory, citing new product in Brooklyn and the West Side Rail Yards as perhaps factors that might cause the market to flatten out in the future. One broker shared with REBNY that the new product coming online could be a positive, stating “The West Side Rail Yards and the successful closing of deals will create new and lower cost alternatives, with landlords investing in assets to retain and attract new tenants.”
Residential brokers expressed high confidence in securing future commissions as well as an upbeat outlook on lending helped bolster the Residential Broker Confidence Index in the first quarter of 2017. The index rose to 6.46 in the first quarter of this year, up 0.32 since the fourth quarter of 2016. This was the first recorded increase in the Residential Broker Confidence Index since the first quarter of 2016, REBNY stated.
However, on a negative note, residential brokers’ heightened concern about the rental market six months from now weighed on the Residential Broker Future Confidence Index, which decreased 0.08 to 6.46 in the first quarter of 2017.
Some of the comments REBNY shared in the report from residential brokers included concerns about rents being too high given the current inventory. Another broker shared that expected increases in interest rates will lead to lower sale prices and higher financing costs, however, banking deregulation could make the financing process easier.
One residential broker commented that rents might be too high given the inventory in the current market, while another indicated that sellers’ expectations are too high.