Bankers watch housing market
December 31, 2007
Want a quick way to know how things are going for banks and other financial institutions in northern Nevada this year? Watch how much the housing slump spills into other sectors of the economy.
As the downdraft in the residential market catches consumers, homebuilders and others who had bet on continued strength in the housing industry, bankers figure that 2008 is unlikely to be a stellar year.
“It creates quite a bit of headwind for us,” acknowledges Chad Osorno, Well Fargo’s northern Nevada president.
But the question is whether the problems with housing can be isolated.
Jim Hunting, chief executive officer of Sierra Pacific Credit Union, says other segments of the region’s economy continue to perform decently well, and growth in employment, as well as continued migration into the region continue to provide solid basics for the region’s economy and its financial institutions.
David Funk, president of Nevada Security Bank, says the housing slump is beginning to show up in the local economy in the form of lost jobs particularly in companies involved in home building and mortgage finance as well less discretionary income for consumers who no longer can cash out rising equity in their homes.
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Loan demand also is softening, he says, as businesses delay decisions while they await a better sense on the direction of the economy.
Says Osorno, “Customers are being appropriately prudent in their borrowing.”
Bankers don’t expect their loan business to pick up dramatically as the new year unfolds.
“Taking into account the economic forecasts for next year, we are realistic about our expectations for loan growth in 2008,” says Dan Dykes, president and chief executive officer of Carson River Bank in Douglas County.
The slowing growth in the financial services industry comes after five years in which the industry went gangbusters. When the Federal Deposit Insurance Corp. measured bank deposits in the Reno-Sparks area in June, it found $18.7 billion on banks’ books a 23 percent increase from just a year earlier.
But the changing market creates opportunities as well as headaches.
For instance, says Dykes, consumers’ uncertainties about the course of the economy may help banks attract more deposits from customers who are wary about the stock market and real estate.
Osorno notes, meanwhile, that Wells Fargo’s home mortgage business has shown strength in recent months as some competitors close their doors and customers look for the comfort of dealing with a large institution.
And Mike Dobrowski, a Reno certified public accountant who is president of Management Services, says CPAs often find that their clients turn to them more often for advice during slowdowns.
The accounting industry’s big challenge this year, he says, is likely to be recruitment of enough staff to keep up with demand.
“We’re optimistic,” Dobrowski says. “It’s going to be a good year.”