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Broker Confidence Surveys Paint Clear Picture of Difficult Market Headwinds
WASHINGTON—The National Association of Realtors recently released its Confidence Index Survey for the month of April, which showed continued broker sentiment that market conditions have and will continue to remain the same with listings low and contract activity staying competitive.
The NAR report indicated that the time on market has declined from 29 days in March to 22 days in April. The Market Outlook of the Realtors Confidence Index for buyers and sellers remained virtually unchanged in April 2023 with 22% of respondents expecting a year-over-year increase in buyer traffic in the next three months, similar to one month and one year earlier. A total of 16% of respondents expect a year-over-year increase in seller traffic in the next three months, a slight increase from 12% last month and down from 22% in April 2022.
With supply still limited relative to demand, 33% of homes sold above list price, up from 28% last month but down from 61% a year ago, the report stated. A total of 73% of respondents reported that properties sold in less than one month. This is up from 65% a month ago and down from 88% in April 2022. Homes listed received an average of 3.1 offers, virtually unchanged from 3.2 last month and down from 5.5 offers in April 2022.
Other key highlights from the NAR Confidence Index Survey were:
• A vast majority of buyers continue to look outside of city centers comprising 84% of their activity.
• First-time homebuyers represented 29% of buyers, virtually flat compared to March 2023 and April 2022.
• 28% of buyers had all-cash sales, nearly unchanged from 27% last month and 26% in April 2022.
• 21% of buyers waived the inspection contingency, unchanged from one month ago and down from 25% from one year ago.
• 18% of buyers waived the appraisal contingency, unchanged from 19% a month ago and down from 26% a year ago.
The Real Estate Board of New York released its Broker Confidence Index for the first quarter of 2023 which showed a struggling commercial market and a resilient residential market in New York City.
With rising interest rates, challenging conditions in the office market and instability in the banking sector, commercial broker confidence in current conditions and future conditions have reached new lows. In contrast, residential broker confidence in each category was essentially unchanged as sales and leasing held steady.
“Higher borrowing costs, looming loan maturations and uncertainty regarding office demand have dampened commercial sentiment and overshadowed positive hospitality and retail activity over the last quarter,” said REBNY Director of Market Data Keith DeCoster. “Fortunately, the residential sector, which was so critical to the city’s resurgence in 2021 registered improved sales and sustained leasing. Residential brokers underscored these strengths but reiterated long-standing concerns about obstacles to housing development as well as growing concern about financial sector instability.”
The Commercial Current Confidence Index fell to -74.7 in Q1 2023, down from -45.6 in the prior quarter. The Commercial Expectations Index, which measures six-month outlook, also fell to -56.9 in the first quarter of 2023, down from -20.7 in the prior quarter. Both figures represent a new low since REBNY began tracking broker sentiment in 2017.
Commercial brokers emphasized that promising expectations for return-to-office activity and leasing were dashed in the first quarter. Office leasing thus far in 2023 is below historical averages and building visitation rates have stalled at just over 60% in Manhattan according to REBNY’s research. These local issues come as the Fed has continued to raise interest rates as a significant volume of commercial loans near maturity.
The Residential Current Confidence Index improved to -5.6 in Q1 2023, up from -19.4 in the prior quarter. The Residential Expectations Index fell slightly to 11.7 in the first quarter of 2023, down from 12.9 in the prior quarter.
The difference in sentiment indicates that residential brokers are less pessimistic than their commercial counterparts, even as they remain wary of market challenges. Residential brokers cited strong rental demand and sales picking up in February and March, particularly at higher price points between $4 million and $10 million. However, respondents indicated that ultra-luxury transaction activity has remained sluggish and many deals are not getting finalized due to concerns over a potential recession, according to the report.
In addition to macroeconomic points, brokers expressed concerns about several issues with potential policy implications:
• Substantive and sustained return to the office;
• Improving quality-of-life issues (crime, sanitation, and transit);
• Clarity on the incentives for housing development, including affordable housing and potential office-to-residential conversions; and
• Concerns that additional regulation such as rent control may turn away property investors and impede property maintenance.