Brokerage leaders told Intel that their confidence in improving capital positions remains but is weakening. What happens next remains an open question, with huge implications for the real estate industry.
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When the Federal Reserve considered cutting interest rates in March, the housing industry largely assumed the worst parts of the deal downturn were behind them.
Now, their mood is a bit complicated.
In late March, a growing number of brokerage leaders reported a deteriorating outlook for capital markets — an element of the economy where real estate faces dual risks.
This key insight (explored in detail in the full report below) is the first finding from the March edition of the Inman Intel Index, which surveyed more than 1,000 real estate professionals and ended on Monday.
In the coming weeks, Intel will explore a number of findings from the latest investigation, the first since the National Association of Realtors and Compass reached a commission lawsuit settlement.
The survey also delves into an issue that brokerage leaders say has become one of their biggest challenges and will likely only become more difficult in the coming year: recruiting and retaining high-performing brokers. Intel’s in-depth series on the 2024 recruiting battle will be released next week.
But first, learn more about what brokerage leaders think will happen to capital markets, and why the issue remains a high-stakes proposition for the industry as a whole.
Two steps forward, one step back
Not all brokerage leaders feel they need access to capital in a pinch.
If you’re not opening a new office or acquiring another brokerage, the concept of a loan may not be the most pressing concern.
Still, many brokerage leaders are keeping a close eye on capital markets. If nothing else, they are tied to the same financial system that determines mortgage rates and therefore affect transaction volumes.
Here’s what Intel learned from hundreds of brokerage leaders who responded to the publication’s monthly sentiment survey since the start of the year.
- Considering cost and accessibility, 42% Brokerage Leader March feel better About raising funds Compared with the same period last year 53% Who said the same thing in January.
- Brokerage Leaders feel worse On the prospect of raising funds 49% The March data for this group are from 38%.
- Selected remaining shares of leading securities firms “Other” response choicesmost of whom clarified that the question did not apply to their respective businesses.
In short, brokerage leaders have flipped the issue on its head. In January, a majority believed capital conditions were improving, but in the following months that share fell sharply.
What gives?
For clues, we can look to changes in the schedule for possible rate cuts by the Federal Reserve.
In January, many observers expected the Fed to begin cutting interest rates as early as its March meeting, reducing the cost of servicing many types of debt in the process.
But the earliest rate cuts have yet to materialize. This delay affects not only the current financing environment but also business leaders’ outlook for the year ahead.
Fed “decoupling”?
To better understand the factors that influence broker leadership decisions, Intel is seeking feedback on their capital markets assumptions in the coming months.
These leaders are generally optimistic about improvements in capital markets.
But as Intel has documented across many key areas of real estate, optimism in capital markets has only grown since the start of the year.
- Among brokerage leaders surveyed by Intel in March, 50% tend to think that capital will be easier or cheaper to obtain That’s 12 months away now.
- However, as recently as January, 61% Brokerage leaders interviewed echoed this optimistic outlook.
For many industries, prospects for economic growth appear increasingly decoupled from the Fed’s actions.
Even though the rate cut has been delayed by several months, shares of the 500 largest publicly traded U.S. companies are still up more than 9% since the start of the year.
But for real estate companies, rate cuts are about more than simply access to cheaper capital. Their main source of revenue – home listings and transactions – depends largely on whether customers find current mortgage rates attractive enough to enter the market.
Perhaps for this reason, there has been little change among brokerage leaders since the start of the year in insisting on the importance of rate cuts.
- Percent of brokerage leaders who tell Intel real estate market is recovering At least rely on “a good deal” Interest rates have been cut several times this year 65% March.
- it’s just going down 3 percentage points Judging from the response share in January, it is completely within the normal monthly fluctuation range.
In other words, if the housing industry becomes “decoupled” from the Fed’s actions like the rest of the economy, the impact may be minimal or non-existent.
Intel will continue to track these sentiments in the coming months.
Methodological Notes: Inman of the month Intel index poll Taking place from March 19 to April 1, 2024.Invite the entire Inman reader community to participate, and Intel 1,009 replies received.Respondents to this poll They were directed to the SurveyMonkey platform where they self-identified their profile in the residential real estate market. Respondents were limited to one response per device, but there was no limit on IP address. Once a profile is selected (residential real estate agent, mortgage broker/banker, business executive/investor/proptech or other), respondents answer a unique set of questions for that specific profile.because poll There is no requirement for demographic information such as age, gender, or geographic location, and there is no weighting of the data.this poll Will be conducted monthly, with recurring questions and unique questions for each profile type.
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