REBNY Index: Financing Forecasts Raise NYC Real Estate Broker Confidence in 2Q17

Quarterly survey observes positive shift in broker outlook on financing market conditions

New York City real estate brokers are encouraged by current and expected financing market conditions amidst continued general concerns for overall market activity, according to the Real Estate Board of New York’s (REBNY) Broker Confidence Index. The Real Estate Broker Confidence Index, which measures overall residential and commercial real estate broker outlook in both the present situation and future real estate market, rose 0.02 from the first quarter of 2017, to 5.89 in the second quarter of 2017.

The Real Estate Broker Future Confidence Index, which measures broker confidence in the market six months from now, pivoted downwards to 5.56 in the second quarter of 2017, a decrease of 0.14 from last quarter. Brokers’ outlook on future commercial leasing, future residential rental market activity, and future residential commissions was more reserved this quarter compared to  last quarter.

“Our membership survey continued to reflect caution among our brokers who closely monitor economic indicators that are impacting activity across New York City’s commercial and residential real estate markets,” said John Banks, REBNY President. “While our members report slower decision-making and price sensitivity, they remain positive about the market with optimism for improved financing conditions.”

The Commercial Broker Confidence Index was 5.84 in the second quarter of 2017, an increase of 0.56 from the previous quarter, while the Commercial Broker Future Confidence Index increased 0.35 quarter-over-quarter to 5.28. Commercial brokers responded more positively to survey questions about the overall market, current and future financing, and current leasing conditions, specifically in areas that offer convenient access to transportation. Responses to the question on current commercial financing indexed much higher this quarter at 7.42, an increase of 2.09 from last quarter.

In contrast, some commercial brokers responded more negatively when asked about their outlook on the leasing market six months from now. Respondents’ expectations of the leasing market six months from now were indexed at 3.78, down 1.01 since the first quarter of 2017. Commercial brokers expressed some unease in the leasing market, commenting on the slower pace of leasing contracts.

“Many factors are affecting the leasing of commercial space, especially retail. One factor that is controllable is moderating the real estate tax increases that have occurred in the past decade,” said one commercial broker.

Another stated: “The market is very cautious and there are not as many sales as last year. Buyers feel prices are too high and cap rates are too low.”

The Residential Broker Confidence Index was 5.94, down 0.52 since the first quarter of 2017. Similarly, the Residential Broker Future Confidence Index decreased 0.61 quarter-over-quarter to 5.85. Residential brokers’ confidence in future commissions dropped from an index of 6.90 to 5.92, causing the overall index to fall.

“The New York City residential sales market is strong, but slow. Many of the new developments are experiencing good absorption, with fewer projects in the pipeline. Resale is slow (no rush), but well-priced (correctly priced as opposed to aspirational pricing) units sell quickly,” explained one residential broker.

Another stated: “The market is currently slow and deliberate. Buyers are holding back for exactly what they want, although there is not a great deal of inventory. Sellers are becoming more flexible.”

Residential brokers’ confidence assessment of the current and future rental market was low, but their assessments did not significantly decrease in the second quarter of 2017. Responses to the question about the current rental market were indexed at 3.07, an increase of 0.14 quarter-over-quarter. Responses to the question about the future rental market were indexed at 3.31, a decrease of 0.51.

Although brokers have commented that demand among buyers and renters has softened, their assessment of the current and future financing landscape is very positive; their responses to survey questions about financing were indexed at nearly 8.0 and 8.74 accordingly.

“Financing seems good at this point,” said one residential broker.

Another shared: “All the data coming out is positive (unemployment, low interest rates still, surging stock market, etc.), yet the impact of these is not seen in the Real Estate market.”

Download the REBNY Second Quarter 2017 Broker Confidence Index report.