CREFC Board Sentiment Index Turns Sharply Negative
April 26, 2022
On April 19, CREFC released the results of its 1Q 2022 Board of Governors’ (BOG) Sentiment Index. This most recent survey indicated concerns across various fronts with the overall index dropping sharply from 105.2 in 4Q 2021 to 80.5 in 1Q 2022. This was the second-largest drop in the index after a 31% drop in early 2020, the first survey conducted after the beginning of the pandemic.
The results of this quarter’s survey were not altogether surprising, given uncertainty surrounding inflation, rising interest rates, the lingering effects of the pandemic, as well as geopolitical risk. The questions with the most significant movements revolved around the forward-looking sentiment for the U.S. economy, demand for CRE and multifamily debt, and the overall outlook for CRE finance businesses.
Sentiment for the U.S. economy saw a meaningful shift for the second consecutive quarter. Whereas the previous quarter saw a movement toward neutrality, the current quarter’s activity was decidedly negative. The Board also tempered its outlook for borrower demand with only 13% believing there will be greater demand and 35% believing there would be less demand. Finally, while sentiment for all CRE finance businesses moderated from the preceding quarter, the Board did not foresee any liquidity concerns and indicated there is ample capital available for borrowers seeking to finance their projects.