FDIC: National Edition Regional Outlook, Spring 2004

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FDIC Outlook

Camera-ready art of "Regional Outlook" (597Kb) PDF file - PDF help or hard copy

In Focus This Quarter
Housing Bubble Concerns and the Outlook for Mortgage Credit Quality—U.S. home prices have risen briskly over the past several years, outpacing growth in disposable income. In terms of sales volumes, the housing sector had another banner year in 2003. This housing boom has raised concerns among some analysts about the possibility of a home price bubble and the specter of home prices suddenly collapsing. At the same time, rising levels of consumer and mortgage debt, and a decline in the quality of that debt, also merit attention. What connects these areas of concern is the possibility that household credit quality could decline further if home prices were to decline precipitously. This article reviews current evidence and expert opinion on the possibility of a national home price bubble and considers the overall outlook for mortgage credit quality for the remainder of 2004.
By Cynthia Angell, Senior Financial Economist

The FDIC's Economic and Banking Outlook in Charts—This new feature provides a graphic executive summary of the FDIC's analytical perspective on current economic and banking issues, but it is not meant to be an exhaustive analysis of these issues. Please refer to the FDIC Outlook articles and other FDIC publications for more in-depth analysis (www.fdic.gov). We are constantly striving to improve the FDIC Outlook and other publications. Please contact Associate Director Rae-Ann Miller at rmiller@fdic.gov with your comments about this new feature or any of our publications.
By Risk Analysis Staff

FDIC National Edition Map

Regional Perspectives

Atlanta—Structural and cyclical forces will affect the performance of the manufacturing sector. Areas with significant employment in traditional industries that remain under structural pressure may recover more slowly, and insured institution credit quality could weaken further.
Chicago—The regional economy is improving, albeit unevenly among industries and across states. Should interest rates rise further, insured institutions will face continued challenges to increase revenue while maintaining favorable asset quality.
Dallas—Branching activity in the Dallas Region, driven by economic and demographic factors, has significantly exceeded that of the nation during the past decade. The performance of insured institutions varies in response to specific branching strategies.

Kansas City—Hydrological drought conditions may begin to affect farmers' ability to irrigate crops, which could hurt yields and contribute to greater weakness in agricultural bank credit quality.
New York—The housing sector has continued to perform strongly in the Northeast. However, higher interest rates and moderating appreciation in home prices could challenge many of the Region's insured institutions.
San Francisco—Despite weak office market fundamentals, insured institutions in several metro areas report exposures to commercial real estate lending that exceed the national median. Credit quality remains sound overall; however, continued economic weakness could contribute to deterioration in asset quality.
By Regional Operations Staff

FDIC Outlook Information
In Focus This Quarter
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Last Updated 02/26/2004

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Regional Perspectives
Atlanta—Structural and cyclical forces will affect the performance of the manufacturing sector. Areas with significant employment in traditional industries that remain under structural pressure may recover more slowly, and insured institution credit quality could weaken further. Chicago—The regional economy is improving, albeit unevenly among industries and across states. Should interest rates rise further, insured institutions will face continued challenges to increase revenue while maintaining favorable asset quality. Dallas—Branching activity in the Dallas Region, driven by economic and demographic factors, has significantly exceeded that of the nation during the past decade. The performance of insured institutions varies in response to specific branching strategies.		Kansas City—Hydrological drought conditions may begin to affect farmers' ability to irrigate crops, which could hurt yields and contribute to greater weakness in agricultural bank credit quality. New York—The housing sector has continued to perform strongly in the Northeast. However, higher interest rates and moderating appreciation in home prices could challenge many of the Region's insured institutions. San Francisco—Despite weak office market fundamentals, insured institutions in several metro areas report exposures to commercial real estate lending that exceed the national median. Credit quality remains sound overall; however, continued economic weakness could contribute to deterioration in asset quality. By Regional Operations Staff