When a quarterly survey found New York City’s brokers even more pessimistic than before, there was no need to double-check the results.
With interest rates rising and inflation remaining high, broker confidence dropped in the third quarter, according to a survey of residential and commercial brokers by the Real Estate Board of New York.
After falling into negative territory last quarter for the first time since 2020, the Residential Current Confidence Index — the measure for residential brokers — dipped further, from negative 1.74 to negative 17.41.
Interest rates were cited as the top concern by nearly half of residential brokers. Agents across the country have seen buyers and sellers pull back as mortgage rates surpassed 7 percent in October, putting a damper on loan applications.
In the rental market, brokers surveyed said demand for apartments remains robust and rents exceed pre-pandemic levels, but some suggested that interest in rentals has peaked. Brokers also cited impacts from the 2019 rent stabilization reform and the expiration of 421a as hindrances.
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Commercial broker respondents were also down on the market. The Commercial Current Confidence Index declined from negative 37.72 to minus 40.58. Inflation — which was 9 percent in June, the highest since the late 1970s, and still over 8 percent in September — was the primary reason for commercial brokers’ concerns.
Inflation itself is not the issue so much as interest rates, which the Federal Reserve pushes up in an effort to get inflation under control.
Still, the Commercial Current Confidence Index remains above the all-time low of -64.32 in the second quarter of 2020, when the pandemic began.
Brokers’ six-month outlook improved from the previous quarter on both the residential and commercial side. The Residential Expectations Index rose from negative 10.07 to minus 5.46, and the Commercial EXI increased from negative 34.87 to negative 22.83.
“Many of the brokers were slightly more optimistic about the six-month outlook. These respondents view interest rate hikes as necessary medicine that will cause short-term disruption but will set the stage for a return to the long-term growth the city has previously enjoyed,” REBNY director of market data Keith DeCoster said in a statement.
The confidence indexes are created through surveys of REBNY members conducted during the last several weeks of each quarter.