REBNY Index: Presidential Election Impacts NYC Real Estate Brokers’ Confidence in 3Q 2016

Index tracking commercial and residential brokers’ confidence in current and future market hits lowest point since highest peak in 4Q 2014, start of campaign season

New York City real estate brokers are reporting that concerns over the nation’s political future and the presidential election drove down confidence in the third quarter of 2016, according to the Real Estate Board of New York’s (REBNY) latest Broker Confidence Index.

Drops in both the commercial and residential broker indices have contributed to the slow and steady decline in overall broker confidence in the current market and market six months from now. Both indices hit their lowest points this quarter following a downward trend, which started after the fourth quarter of 2014 when the Real Estate Broker Confidence Index hit an all-time high and the first potential candidates began exploring their run for presidency.

The Real Estate Broker Confidence Index for the third quarter of 2016 was 5.79. This overall index for both commercial and residential brokers decreased 1.25 points from 7.04 in the second quarter of 2016 and 3.43 points from the fourth quarter of 2014 when it was 9.22. Similarly, the overall broker confidence index for the market six months from now was 5.29, a 1.18-point dip from 6.47 last quarter and a 3.94-point drop from the fourth quarter of 2014 when it was 9.23.

“This election cycle has put pressure on brokers’ optimism despite the sustained health of the real estate market in New York City,” said John H. Banks, III, REBNY President. “Their uncertainty is being affected by ongoing economic and governmental issues that have impacted the pace of decision-making on a local and national scale.”

The Commercial Broker Confidence Index in the third quarter of 2016 was 5.21, a 1.36-point decrease from last quarter’s 6.57. Similarly, the Commercial Broker Confidence Index for expectations of the market six months from now was 4.32, down 1.39 points from 5.71 last quarter. This is the first time that any aspect of REBNY’s confidence indices have fell below 5.00, which signals that more commercial brokers are shifting to a less positive view of the market and remain cautious.

Concerns about the country’s political future and bank regulations have continued to influence the outlook of the commercial brokers. Some voiced their apprehensions sensing a slowdown in the retail market due to the industry’s transition to web-based services. Others expressed that government regulations and lending are affecting banks’ abilities to finance transactions, which are delaying their closing times.

Despite this quarter’s drop in confidence, some commercial brokers are optimistic about the future. One commercial broker predicted, “There should be a bounce in activity after the election.”

The Residential Broker Confidence Index decreased to 6.37, a 1.15-point decline from 7.52 last quarter. Residential brokers’ concerns in the current market and the market six months from now include softening in the rental market and uncertainty for the presidential election.

“The rental market is slowing down due to the amount of new development on the market, causing landlords of older properties to expect similar rental rates, which is not achievable,” said one residential broker.

Another residential broker commented, “Several clients have put off selling and/or buying homes until after the election, most likely until 2017 to see how the market plays out.”

Some brokers mentioned that domestic buyers are lagging on committing to transactions because of the election, while foreign buyers have also grown more cautious due to the election and international economy.

Residential broker confidence in the market six months from now decreased 0.97-points to 6.26 in the third quarter of 2016 from 7.23 last quarter. Some brokers remain confident witnessing strong activity in the home sales market for inventory priced at $2 million and below, while others are feeling the impact of an oversupply in the luxury market. Uncertainty over interest rates and the presidential election has left many residential brokers unsure of what market conditions will be like six months from now.

REBNY’s Broker Confidence Index is a collection of responses from an online survey given to REBNY’s commercial and residential brokerage division members.

Download the report.