Nearly half of community bank executives say the current state of the housing market “poses a serious risk” to the U.S. economy.
That finding is part of a survey of 473 small banks conducted by IntraFi Network during the first half of July as part of the company’s Q2 2021 Bank Executive Business Outlook Survey. Smaller banks were more likely to view the housing market as a source of concern: Half of those with assets of $1 billion or less said the situation posed a threat, but that number dropped to 38 percent for institutions with between $1 to $10 billion in assets.
Nebraska Bankers Association President/CEO Richard Baier said escalating housing prices statewide are causing “significant angst,” especially in rural communities. He expects that trend to last for years as construction costs rise and the shortage of available contractors and construction companies continues. Though the housing market remains hot in larger cities like Omaha and Lincoln, Baier noted the extreme situation extends even to smaller towns.
Baier, however, does not view the current housing market as comparable to the industry before the Great Recession because interest rates are lower and there are fewer risky mortgages in the housing market than 15 years ago.
Other IntraFi survey results included:
- A lack of optimism by smaller community banks: Expectations for overall economic improvement among respondents at banks with assets of $1 to $10 billion measured 67 percent, but that dropped to 49 percent among those with assets of $1 billion or less.
- 71 percent noted improved economic conditions from Q1 2021.
- Inflation was not a top concern for community bankers: 60 percent said they did not believe it was a “real worry,” 40 percent indicated it as a potential concern and 20 percent reporting recent price spikes in lumber and the housing markets are due to supply chain issues, not representative of broader inflation. Nearly 40 percent thought the Fed either lacked the necessary tools or would be limited by politics in adequately addressing inflation.
The survey was delivered via email to bank CEOs, presidents and CFOs. Of the respondents, 241 or 51 percent were CFOs, 177 or 37 percent were CEOs and 55 or 12 percent were presidents.