Wisconsin Bankers Association: Predict housing recovery in 12 to 18 months

For more information, contact Eric Skrum
608-441-1216 or [email protected]

Economy is weaker than a year ago, but no recession predicted in 2008

(MADISON) – Demand for residential mortgages is low in most parts of Wisconsin and will likely stay that way until the housing market recovers in 12 to 18 months, according to the latest Bankers Economic Index sponsored by the Wisconsin Bankers Association (WBA). Overall, Wisconsin bank chief executives say the state’s economy is weaker than a year ago, but are not predicting a recession in 2008.

Forty-one percent of the 132 Wisconsin bank CEOs who took part in the economic conditions survey predict that the state’s housing market will recover in 18 months, while 30 percent believe it will rebound in 12 months. Accordingly, 60 percent of bankers say that residential loan demand will be flat through the first six months of 2008, 31 percent say mortgage loan demand will drop further and just 16 percent said demand will rise.

Fifty-three percent of the bankers surveyed rate the overall Wisconsin economy as “good,” while 45 percent say it is “fair.” Those numbers are less optimistic than how bankers rated the economy last summer, but 65 percent don’t see the economy weakening further during the first six months of the new year, and 55 percent don’t believe the state will see a recession in 2008, compared to 35 percent who said they were unsure.

“Wisconsin bank CEOs seem to believe that growth in other business sectors like manufacturing, agriculture and tourism will help offset the housing drag in 2008,” commented Kurt R. Bauer, WBA president/CEO. “However, bankers remain concerned about the adverse impact of high oil prices on the economy and report weakening commercial loan demand most likely because of the trickle effect from the housing slowdown.”

Commercial Loan Demand: Sixty-five percent of Wisconsin bank CEOs say commercial loan demand, a key indicator of economic health, will stay at current levels during the first six months of the year, while 25 percent say it will drop and just 9 percent said it will go up.

Interest Rates: Eighty-five percent of bankers predict that short-term interest rates will drop during the first two quarters of 2008. Forty-five percent believe long-term rates will drop during the same period, while 44 percent say rates will stay the same.

Foreclosures and Bankruptcies: Forty-percent of bankers reported increases in customer bankruptcies, down slightly from 43 percent six months ago. But bankers are seeing more customers having trouble making mortgage payments and increased home foreclosures. Forty-eight percent said foreclosures increased during the past six months and 49 percent said past dues for residential mortgage payments also increased.

Employment: The employment picture in Wisconsin appears to be mostly unchanged from a year ago, according to bankers. Eighty-one percent predict that businesses in the markets they serve will maintain current staffing levels, compared to 83 percent in January 2007.

Financial Crimes: Fifty-three percent of Wisconsin bank CEOs report increases in all forms of financial crimes targeting financial institutions and their customers, up from 47 percent six months ago.

MEDIA NOTE: For more information on the state of Wisconsin’s economy, consider attending the 2008 Wisconsin Economic Forecast Luncheon. This event will take place Tuesday, Jan. 22 2008 at the Monona Terrace Convention Center, Madison. Governor Doyle will speak at the event while a nationally known economist will address what is in store for Wisconsin. Details can be found at www.wisbank.com.

For a Luncheon Media Pass please contact the Wisconsin Bankers Association’s Eric Skrum at 608/441-1216, [email protected].