Broker confidence in the residential sector hit negative territory during the second quarter of the year for the first time since 2020, when the arrival of Covid upended virtually everything about the city’s real estate market, and it fell further into negative territory this past quarter. Almost half of the brokers surveyed cited interest rates as their top concern, as the rate for a 30-year fixed home mortgage hit 6.3% in early September, a record dating back to fall 2008, and increased still further to 7% in October. These rates have a major impact on potential homeowners who can’t afford to make an all-cash purchase and are likely contributing to the slowing pace of deals following last year’s incredibly strong sales numbers.
Rental brokers are also seeing signs of a slowdown following the record-high rents from earlier in the year, suggesting the market may have peaked even as the demand for apartments remains robust. They also cited the lack of a replacement for the state’s 421-a affordable housing tax break and continued fallout from the strict 2019 rent law as limiting opportunities for new multifamily developments.
The median rent in Manhattan was still quite high in October, at $4,009, but this did mark a slight decrease from the medians of $4,022 in September and $4,100 in August, according to the data from Douglas Elliman.
Commercial brokers were even more pessimistic than their residential counterparts, although their confidence index was still higher than the all-time low it hit during the second quarter of 2020, the report says. Office and retail properties have in general had a rougher time during the pandemic than residential ones, although hotels saw some good momentum during the third quarter, with occupancy reaching almost 90% of its 2019 levels at the end of September, according to the report.
Major concerns going forward cited by the brokers include getting quality-of-life issues such as crime and sanitation under control and getting more workers back to the office on a consistent basis.
The REBNY confidence report comes out quarterly, and the organization gathers information about it during the last few weeks of each quarter by surveying its brokerage members. It surveyed roughly 500 brokers for the latest report.