While the US economy struggles, ten states are doing OK
They've avoided the worst of the housing bust. Oil and gas revenues have helped too.
The economies of 10 states are outperforming the US economy as a whole, according to a just-released study by the Nelson A. Rockefeller Institute of Government, an independent research group in Albany, NY, which analyzes state and local government.Skip to next paragraph
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The two biggest reasons, say the authors of the report, are that most of these states have economies that benefited through much of 2008 from high and rising oil and natural gas prices, and their real estate markets have not suffered the bust to the extent seen elsewhere.
“As for lessons for other states, they’re not too easy to emulate,” says Donald Boyd, co-author of the report. “Have a lot of oil, and don’t run your real estate prices up into the stratosphere.”
Mr. Boyd and other analysts say that the ten states (Alaska, Wyoming, Louisiana, Nebraska, Texas, Iowa, New Mexico, Utah, Oklahoma, and South Dakota) did not enjoy the real estate boom seen in places like California, Arizona, and Nevada – and therefore have not gone bust to the same degree.
That's because banks did not practice what Bob Denk of the National Association of Home Builders (NAHB) calls the “grotesque deterioration of lending standards” which fueled housing demand and produced rapid price increases.
“There was a lot of wacky lending practices everywhere, and so it’s just a matter of degree how overheated any of these markets got,” says Mr. Denk.
Markets on both coasts started with “the noble goal of trying to extend home ownership to those who might not qualify under stricter rules” he says. Whereas in 2001, only about one percent of the nation’s housing loans were in the sub prime category, the national average now is 5.5 percent. Nevada is now at 12.5 percent after dropping back from 13 percent. California and Arizona are in the 8 percent range, Denk says.
Less boom means less bust
“I don’t think there is a great mystery here,” says David Merriman, professor of public administration at the University of Illinois at Chicago. ”These are states that had less boom and so have less bust. They are relatively favored by industrial composition.”