Interest rates, rising costs and the economy’s unclear future are dampening the outlook for real estate brokers in New York City, with their confidence falling back to levels not seen since the most uncertain days of the pandemic.

The Real Estate Board of New York's second-quarter current confidence index for commercial brokers fell to -37.72 from 17.05 three months prior. The score reflects brokers' answers to seven questions about the state of the real estate market and considers zero a neutral answer.

Residential brokers’ confidence dropped, too, but not quite to the depths of those in the commercial sector, going from 31.41 in the first quarter of the year down to -1.74 in Q2.

“Despite continued strength in the residential sales and leasing market and the faster-than-expected acceleration in retail and hospitality, brokers expressed clear concerns regarding the direction of the overall economy moving forward,” REBNY Director of Market Data Keith DeCoster said in a statement releasing the findings Thursday.

“While the real estate sector has been helping to propel the city forward, it remains to be seen how much rising interest rates, coupled with elevated costs, will dampen these positive trends."

The index hasn’t been in negative territory since 2020 when confidence was at its lowest point on record. Residential CCI went down to –24.71 in the third quarter of that year, while commercial sentiment went down to –64.32 in the second quarter. By the summer of 2021, the outlook was far rosier off the back the widespread availability of vaccines and momentum in the market.

Interest rates are the biggest concern for residential brokers, while inflation and economic uncertainty are weighing on commercial brokers’ minds. This week, the Federal Reserve, as anticipated, increased rates by three-quarters of a percentage point. The U.S. economy shrunk for the second quarter in a row, which many see as the technical definition of a recession.

Some commercial real estate deals are falling apart amid the uncertainty and the rising cost of debt. While tourism in the city has improved, office leasing is recovering and investment sales have held firm so far, there are concerns about what lies ahead. Brokers said in the survey they want to see a more significant return to the office and greater support from the government for businesses.

They also listed issues around crime and transit as key to helping the city make its comeback. In the medium term, brokers are similarly pessimistic — a rarity for the profession. For commercial brokers, REBNY’s six-month expectations fell to -34.87, while for residential brokers it was down to -10.07.