According to two market reports released by the Real Estate Board of New York (REBNY), NYC is facing some formidable challenges as the city finds its way out of the economic weeds it was thrown into by the coronavirus pandemic.
REBNY’s Monthly Investment and Residential Sales Report is a compilation of transaction activity for both investment sales and residential sales in NYC and the state at large. In an effort to quantify the impact of the coronavirus crisis on the City and the State’s ability to generate taxes needed for essential government services, REBNY tracks all revenue generated by each asset class and transaction on a monthly basis, analyzing official data from the NYC Department of Finance’s Automated City Register Information System (ACRIS) and capturing total sales volume, number of transactions and tax revenue.
This month’s report was released on July16, and showed tax revenue generated from investment and residential sales in New York City and New York State declined 62% from June 2019 to June 2020, but increased by 56% from May 2020 to June 2020. According to REBNY, “This represents a $120 million loss in tax revenue for the City and State year over year, but a $26 million increase from month to month. Last month, REBNY reported a 76% decrease in tax revenue year over year from May 2019 to May 2020, and 40% decrease month to month from April 2020 to May 2020.”
REBNY’s Q2 2020 Quarterly Real Estate Broker Confidence Index surveys the organization’s residential and commercial brokerage members to measure their confidence in the real estate market across the city’s five boroughs. The index was launched in 2012, and according to REBNY, it “benchmarks key data and insights from the real estate industry to track critical economic indicators such as activity from renters and buyers, pricing and political climate. The survey captures broker attitudes about current market conditions as well as their projections on market conditions six months ahead.” The report includes a maximum index of 10, with zero indicating the least confidence and 10 indicating the highest confidence. An index value above five indicates that broker sentiment is more positive than negative.
The latest report, also released July 16, reported that broker confidence has hit its lowest point on record for the second quarter in a row. According to the report, “The current real estate broker confidence index is 3.30 out of 10, down from 3.72 last quarter, representing an 11% decrease since brokers were last surveyed in the first quarter of 2020 and a 50% decline since the same time last year. Additionally, the survey results indicate a decline in brokers’ outlook on the future market six months from now - that index is 3.91, an 11% decline from the first quarter of 2020 and a 35% decline since the same time last year.”
According to REBNY President James Whelan, “While we are seeing encouraging signs in both the management of our ongoing public health crisis and restarting the economy in New York City, caution abounds in its real estate industry. Tax revenue generated by real estate appears to have hit its bottom in May 2020 and may be starting the long road back. Broker confidence – or lack thereof – signals the critical need for the federal government step up to provide the State and local aid required to recover from this pandemic.”
The real estate industry employs hundreds of thousands, and serves as the fundamental driver of New York City’s economy, representing more than half (53%) of the City’s total annual tax revenue in the last fiscal year. That’s more than double the revenue generated by personal income tax, which at 21% of the City’s annual tax revenue is the next closest contributor. And it’s not just numbers; tax revenue enables the City of New York to maintain the salaries of first responders, fund infrastructure improvements. and provide for public services like schools, libraries and parks.
According to REBNY, June 2020 was the first month to see an increase in residential and investment sales since the beginning of the pandemic. The increase coincided with Phase Two of the New York Forward, which commenced on June 22 and allowed real estate services to resume. Key findings from the report include:
From May 2020 to June 2020, total sales volume increased 100%.
From June 2019 to June 2020, total residential sales and transactions declined, resulting in a 36% decrease in tax revenue. This represents a combined loss of $30 million in tax revenue at the City and State level compared to the previous year.
From June 2019 to June 2020, total investment sales and transactions declined, resulting in an 83% decrease in tax revenue. This represents a combined loss of more than $90 million in tax revenue at the City and State level compared to the previous year.
Phase Two of New York Forward - wherein commercial office and retail tenants were able to return to in-person operations - began about halfway through the June 15-30 time period during which REBNY conducted its Quarterly Real Estate Broker Confidence Index survey. Key findings from the Q2 2020 Index report include:
This quarter received a record-low in overall real estate broker confidence with an 11% decline between the first and second quarters of 2020. However, the breakout of the commercial and residential sectors indicates different prospects, with residential broker confidence increasing slightly in the same timeframe.
Commercial broker confidence decreased to a historic low at 1.94. This represents a 40% decline from Q1 2020 and a 73% decline from this time period last year.
Residential broker confidence increased 11% from Q1 2020 to 4.66. However, the index declined 25% from this time period last year.