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4th Quarter 2013 Broker Confidence Index
May 1, 2014
The Real Estate Board of New York’s Overall Broker Confidence Index for the Fourth Quarter of 2013 increased from the Third Quarter of 2013, marking the first increase in confidence that we have seen in 2013. Overall expectations for the future also increased, with both residential and commercial brokers indicating that they are optimistic about the real estate and financing market for the first half of 2014, mostly due to the increasing health of the economy.
The Confidence Index within the Commercial market showed an increase from the Third Quarter, up from 9.18 to 9.49. With increased employment, brokers reported seeing more office leasing activity, and expect it to last into the coming months. Brokers expressed concerns about high rent and sales prices and lack of space, with one broker stating, “It is a seller’s market. Prices are high and there is little to no product to be sold.” Nevertheless, brokers are very confident in the availability of financing, now and six months from now, for commercial transactions.
The confidence in the present situation in the Residential market showed a modest dip from the Third Quarter, with an widespread concern shown for both the lack of inventory in the sales market and the expectation of rising interest rates. Nearly a quarter of the brokers expressed concern that the lack of inventory in the market has been driving prices up and pricing buyers out of the market. One broker stated, “The challenge is lack of inventory and now higher interest rates, making it even more difficult for financing buyers versus all-cash ones.” Others see this trend as a positive, asserting that the high prices resulting from the lack of inventory indicate a strong market, and that although interest rates are rising, they are still historically low. Another broker stated, “Low inventory, interest rates still historically low, and continued competition are keeping the market strong and will continue to do so.” The Confidence Index this Quarter showed an increase for the market six months from now, with hopes that more inventory and improved financing will help future market performance. There is still some concern about the financing of residential real estate, despite the strong confidence in the market.
Residential brokers have positive expectations for 2014. Increased prices of real estate in Manhattan have been driving buyers to look more affordable options in the boroughs outside of Manhattan, especially Brooklyn. Brokers expect to see continued growth into these boroughs in the coming year, and see this as a positive for the City and the industry. A second reason behind positive expectations is the increased amount of activity from foreign investors, with one residential broker stating, “The foreign market is playing now a major role in the real estate market and it will continue to be a major force in the Manhattan market.”
With an increase in both Overall Broker Confidence and Overall Expectations for the Fourth Quarter of 2013, brokers are confident in the current market and expect to see market conditions continue to get better in 2014. As we begin the New Year, broker confidence is on the rise.