Hughes, Weiner present results of 5th annual NJBankers Economic Survey

January 16, 2015

The New Jersey Bankers Association has released the results of the fifth annual NJBankers Economic Survey of bank CEOs. The survey inquired about national and state current economic assessments, as well as six-month projections; expectations about long-term and short-term interest rates; commercial real estate and business loan demand; and residential loan demand. The survey also explores changing demographics with a focus on the millennial generation.

The survey was conducted by the Bloustein Center for Survey Research (BCSR) under the direction of James W. Hughes, Dean and Distinguished Professor, Edward J. Bloustein School of Planning and Public Policy, Rutgers University;Marc D. Weiner, Associate Research Professor and Associate Director, BCSR; and Orin Puniello, Assistant Director, Research, BCSR.

The survey sampled all 108 member institutions of the New Jersey Bankers Association. Of the 108 banks in the panel, 84 completed the survey questionnaire for an overall response rate of 77.8%.

Highlights of the survey include:

  • The 2015 survey respondents recognized sustained improvements in the health of the nation’s economy, with the overwhelming consensus that it was “fair to good.” In New Jersey, the survey responses were more muted. While the overall ratings generally improved over the past two surveys, the more positive rating (“good”) lagged significantly behind that of the nation.
  • The basic expectation for the next six months is for long-term interest rates to “remain the same.” While the basic expectation for short-term interest rates is also to “remain the same,” an increasing number of respondents – compared to past surveys – expect them to “go up.”
  • Business loan demand, in general, is continuing to improve. While a majority of those surveyed still rated demand only as “fair,” it was barely a majority. The “good” and “excellent” ratings continued to grow. Ratings for business loan demand for the next six months also improved in general, but a strong majority of respondents still expect demand to “remain unchanged.”
  • A somewhat more negative assessment of residential loan demand emerged compared to last year’s survey, although the majority of respondents still rated it “fair” and “good.” The expectation that improvement in demand would occur in the next six months diminished; the overwhelming expectation was that it would “remain unchanged.”
  • Assessments of current commercial real estate loan demand also showed improvement; for the first time, the highest proportion of responses fell in “good” category. From, this higher level, the prevailing expectation for commercial real estate loan demand six months from now is to “remain the same.”
  • Multi-family rental housing was rated last year as the strongest commercial real estate submarket. A significant share, but not yet a majority, of respondents “strongly agreed” or “somewhat agreed” this year that the current multi-family rental commercial real estate market is now a bubble.
  • The sharply growing concern for consumer lending was interest rate risk; lack of demand is the second concern, while regulatory concerns diminished significantly. Lack of qualified borrowers supplanted lack of demand as the most significant obstacle to business lending.
  • The Millennial Generation is high on bankers’ radar screens. Virtually all respondents foresee a need to change business practices because of this generation’s needs.

Dr. James W. Hughes noted, “The 2015 survey was taken during the fifth year of national economic expansion, when very high levels of employment growth had been in place for four years. There was a distinct sense by the survey respondents that the national economy had firmly settled into a new post-recession normal: a sustainable positive trajectory. However, consistent with soft state employment metrics, they felt that full-economic lift-off had not yet taken place in New Jersey. Nonetheless, cautious optimism prevailed.”

“The study comported with all best practices of methodologically rigorous survey research,” noted Dr. Marc Weiner, project director. “It achieved just under a 78% response rate, with responses geographically well-distributed across the state. In addition, 71% of responding institutions also participated last year, helping to build a stable time-series data set on these important banking and financial metrics. As a result, the survey validly and reliably captured a continuing representative snapshot in an on-going analysis of the attitudes, interests, and assessments of the New Jersey Bankers Association’s membership.”

John E. McWeeney, Jr., president/CEO of NJBankers, added “The responses 2015 survey reflect that demand continues to improve for lending to businesses and for commercial real estate but demand for consumer, residential, and multifamily lending continues to reflect caution on the part of borrowers.”

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