Huntsville, Ala., Provo, Utah, Yakima, Wash., and Lafayette, La., all have at least one thing in common: They‚Äôre the living, breathing proof that some cities have actually triumphed in the face of a recessed economy.
These mid-size cities ‚ÄĒ where real-estate bubbles were relatively non-existent and where local banks largely avoided the questionable loans that have undermined the stability of many commercial banks ‚ÄĒ are managing this recession better than the nation‚Äôs largest cities and rural towns, according to 2007 data analyzed by Moody‚Äôs Economy and the credit reporting agency Equifax.
The data revealed that mid-size cities have seen their employment rates buck national trends and their lending institutions‚Äô consumer loan balances rise over the past year (‚ÄúMany Smaller Cities Dodge Credit Crunch in Consumer Lending,‚ÄĚ The Wall Street Journal, March 30, 2009).
‚ÄúThe medium-size metros that have done the blocking and tackling are better positioned during the downturn,‚ÄĚ said Ross DeVol, director of regional economics at the Milken Institute, a California-based think tank.
Mid-Size Cities, Banks Poised to Avoid Economic Pitfalls
The success of these cities can be attributed, in part, to their retention of unique employers; many of these cities are home to specialized industries with strong staying power and have been fortunate to land long-term government contracts.
Huntsville, for example, boasts the headquarters of the U.S. Army‚Äôs Aviation and Missile Command and a 3,000-employee Boeing facility, as well as the Marshall Space Flight Center, the NASA flight center that‚Äôs planning a return trip to the moon. The unemployment rate in this city of 376,000 was only 6 percent in January, compared to the national average of 8.5 percent, and consumer loan balances actually increased 13.2 percent per household compared to last year‚Äôs fourth quarter.
And for their part, Huntsville‚Äôs banks and credit unions ‚ÄĒ where problem commercial and consumer loans only represented 2.2 percent of total fourth-quarter lending, compared to the 4.9-percent national average ‚ÄĒ haven‚Äôt just faired well, they‚Äôve been breaking records. Redstone Federal Credit Union in Huntsville originated $43 million in mortgage loans in February, a one-month record for the company, and made $17 million in auto loans in January, which was the fifth-highest monthly total in the company‚Äôs 57-year history. And ServisFirst Bank saw a nearly 70-percent increase of total loan balances in 2008.
Lending Data Could Be Deceiving
The Wall Street Journal is quick to point out that numbers these cities are producing may only be giving the illusion that the cities are thriving and may not be ‚Äúa pure reflection of new lending,‚ÄĚ writes reporter Dan Fitzpatrick. Consumers in these areas may still be engaging in the types of consumer behaviors that contributed to the current economic crisis, drawing heavily on existing credit lines to help them pay off their mounting bills and help them find debt relief.
But Equifax Vice President Jim Powers is confident that this type of borrowing isn‚Äôt the norm. ‚ÄúMost lending these days is pretty tight,‚ÄĚ he said. ‚ÄúAnyone that is getting a new loan, the bank deems pretty low risk.‚ÄĚ
Popularity: 7% [?]