Enter Search TextSubmitSearch Advanced Search     Home     Deposit Insurance     Consumer Protection     Industry Analysis     Regulations & Examinations     Asset Sales     News & Events     About FDIC

		Home > Industry Analysis > Research & Analysis > Regional Outlook

Regional Outlook

Camera-ready art of "Regional Outlook" (355Kb PDF file - PDF help or hard copy) Please Note: A Revision page was added to this article on 12/20/00. See http://www.fdic.gov/bank/analytical/regional/ro20003q/correction.html In Focus This Quarter Ranking Metropolitan Areas at Risk for Commercial Real Estate Overbuilding--Commercial real estate construction has boomed in a number of U.S. metropolitan markets during recent years amid falling vacancy rates and growing demand for new space. Insured depository institutions have reasserted their role as primary sources of capital for this construction boom, particularly in the wake of the 1998 financial markets crisis that left some important market-based lenders on the sidelines. Recent data for some metropolitan areas show that on-balance-sheet exposures of FDIC-insured institutions are by some measures higher now than at the peak of the last commercial real estate cycle during the late 1980s. This article reassesses major U.S. metropolitan real estate markets in search of possible signs of overbuilding that could drive up vacancy rates and drive down rents in the near term. This review points to an underlying trend of markets experiencing more vigorous construction activity across multiple property types. By Thomas A. Murray, Senior Financial Analyst Rising Home Values and New Lending Programs Are Reshaping the Outlook for Residential Real Estate--Rising home prices and high levels of activity in the single-family housing market have been supported by excellent economic conditions and generally low interest rates. However, as interest rates have begun to rise, housing market activity has slowed. Historically, residential real estate has been one of the best-performing asset classes at insured institutions. Concerns have recently arisen, however, that new, higher-risk lending lines of business could adversely affect the future credit quality of residential real estate portfolios. By Alan Deaton, Financial Economist

Regional Perspectives
Atlanta--The expansion of the high-tech industry represents a key component of the economic momentum in many Atlanta Region metropolitan areas. Boston--The trend of declining capital ratios in many of the Region's insured institutions bears watching, given that some indicators of risk are increasing and new risks are emerging. Chicago--Broad liquidity measures point to heightened liquidity risk among the Region's insured institutions and emphasize the need for careful funds management. Dallas--Small insured institutions in the Region's economically robust high-tech MSAs have reported rapid growth, but also increased competition.	Kansas City--The farm bill of 2002 will mark a crossroads in U.S. farm policy, and could have far-reaching implications for farmers and the bankers who lend to them. Memphis--Although real estate markets have begun to slow, construction loan exposure at the Region's insured institutions continues to rise. New York--Despite limited office construction and strong demand throughout the Region, the percentage of banks that specialize in commercial real estate lending modestly exceeds levels of the early 1990s. San Francisco--The high-tech sector boosted economic growth in several of the Region's MSAs. However, insured financial institutions may have increased exposure to more volatile assets.

Regional Outlook Information
Return to Regional Outlook main page