Friday, Sept. 24, 2004 | 11:40 a.m.
Market analysts with the Federal Deposit Insurance Corp. on Thursday handed out their regional economic report cards, and once again, Nevada was at the head of the class.
The good news, however, did not come without words of caution.
Nevada landed high marks in the FDIC's fall state profile for its second-quarter job growth numbers, which led the nation with 4.5 percent gain over the same 2003 quarter. The report also pointed out that Las Vegas was not carrying the state alone -- while the state's largest metropolitan area led the nation for job creation, Reno was fourth.
The state also saw the number of businesses grow by 3.4 percent year-over-year in 2003, the report said, the third-best mark in the country. While the new business rate is off from the state's best mark of 6.9 percent in 1994, the report also emphasized that it is accompanied by a dramatic 31 percent decline in the number of bankruptcies in 2003.
That welcomed slip, the FDIC said, follows year-over-year increases in the bankruptcy rate since 2000.
"The rate of business formation is very robust in Nevada," said Jack Phelps, acting associate director of the FDIC's Division of Insurance and Research.
On the side of caution, FDIC experts said they are watching closely the soaring home prices in Las Vegas.
"Home prices have risen much faster than personal income is growing," Phelps said. "Eventually, there must be some sort of correction."
Catherine Phillips-Olsen, the FDIC's San Francisco regional manager for insurance and research, agreed.
"We have been watching the Las Vegas market quite closely," she said. "In Las Vegas affordability has gone down considerably ... However, relative to California, Las Vegas still seems relatively affordable."
While that's good news, since many of the state's new residents come from California, other factors continue to push homes out of reach.
"We continue to be concerned about rising interest rates," Phillips-Olsen said. "With less affordability, it could impact the sales of homes."
Rich Brown, chief economist for the FDIC's Division of Insurance and Research, pointed out, however, that high interest rates are still far away.
"Clearly, real estate is very strong (in Nevada)," he said. "And those long term interest rates still look very good."
Still, the FDIC said Nevada authorized 19 new residential building permits per 1,000 residents in 2003. It was a fastest rate in the nation and three times the national average.
As an overall component of the economy, while housing could be slipping in strength, stronger business spending could pick up the slack, Brown said.
"Housing has really been carrying the economy while the business sector bore the brunt of the recession," he said. "We are going to see more of a handoff to the business sector."
That assessment was supported by Nevada banking statistics in the FDIC report.
Among the state's banks opened at least three years, the median commercial and industrial loan growth rate was 20 percent in June, the FDIC report said.
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