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Residential Department: Spotlight: Nebraska: November 2016

 

Spotlight: Nebraska

The Cornhusker State is on a slow-growth path.

Nebraska’s economy will slow down at the beginning of 2017 after an expected strong showing for the second half of this year, according to leading economic indicators tracked by the Bureau of Business Research (BBR) at the University of Nebraska-Lincoln. Indicators such as building permits and manufacturing hours showed only modest growth in July after a rapid increase in three of the previous six months, according to an August report.

A separate long-term economic report from the BBR also forecasts moderate growth in the Nebraska economy over the next two years. The “Business in Nebraska” report cites sluggish population growth — in the range of 0.6 percent to 0.7 percent per year — as a major factor that will put a strain on building the state’s labor force.

Another major issue Nebraska has faced in recent years is a “steep decline in crop prices” in 2014 and 2015, followed by falling livestock prices late last year, the BBR business report says. These factors will lead to a projected 8.4 percent decrease in Nebraska farm income this year.

The manufacturing sector has suffered as well, partly due to a decrease in equipment investment from the struggling agricultural sector. These investments are unlikely to increase over the next few years, states the BBR business report. Diminishing agricultural and manufacturing output has negatively impacted the monthly value of Nebraska exports over the past two years, according to a recent report by the Nebraska Department of Economic Development (NDED). Nebraska exports in 2015 fell below 2014 levels during every month, and this trend continued into 2016, with export values running below 2015 levels every month until June.

Even with a sluggish economy, the state’s low population growth has kept the unemployment rate hovering around 3 percent for the past two years. In addition, hourly earnings have increased for the past few years in the manufacturing and professional- and business-services industries, according to the NDED report.

To find jobs, however, more and more Cornhuskers have been moving to Omaha or Lincoln. Employment growth in the three most populous counties — Douglas, Lancaster and Sarpy — which surround the state’s two largest cities, has hovered around 2 percent for the past three years, according to data in a June report from the Federal Reserve Bank of Kansas City. At the same time, employment growth in the other 90 counties has fallen from 2 percent growth in 2013 to a 1 percent decline in 2016.

This migration has been a boon to Lincoln and Omaha real estate, however. The Federal Reserve report shows that median sales prices for homes have been on the rise over the past four years as supply has dwindled. Unfortunately, Nebraska farmland values have declined sharply over that same time frame, according to the report.

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Home sales and prices

Omaha Metro Area Single-Family Home Sales

Over 1 million of the 1.9 million people living in Nebraska reside in the three counties surrounding the state’s two largest cities — Omaha and Lincoln — and these two cities are only 53 miles apart. So it is not surprising that housing sales in the rest of this largely rural state are not tracked systematically. The Omaha metropolitan area, however, has a thriving market, with over 10,000 home sales annually during five of the past seven years. Sales numbers also have increased every year since 2010.

Rising sales numbers have had little effect on median sales prices for existing homes, however, which hovered around $130,000 from 2008 to 2011 before increasing slowly over the past few years to $150,500. New-home prices have increased more dramatically in Omaha over the same time frame. After a large decline after 2008, median new-home sales prices have risen every year in the Omaha metropolitan area, exceeding the 2008 levels in 2013 and reaching $282,531 in 2015.

Delinquencies and foreclosures

Nebraska Foreclosure Filings

Nebraska’s foreclosure activity followed a pattern similar to other states in the years following the housing collapse. According to data from Attom Data Solutions, total foreclosure actions increased from 1,935 in 2009 to 4,122 in 2012 before decreasing steadily to a low point in second-quarter 2014. Since then, foreclosure filings have increased, spiking above 800 total filings in four of the past seven quarters.

Nebraska has one of the lowest foreclosure-inventory percentages in the nation, however, according to data from CoreLogic. As of this past June, only 0.3 percent of all residential mortgages in the state were in foreclosure, which is less than one-third the national rate of 0.96 percent — and a 32.2 percent drop in foreclosure inventory year over year. In addition, only 1.5 percent of Nebraska residential mortgages are seriously delinquent, which is about half the national rate.

Unemployment

Nebraska’s unemployment proved to be fairly recession-proof, according to data from the U.S. Bureau of Labor Statistics. The state’s unemployment rate increased less than 2 percentage points during the Great Recession from a low of 2.9 percent in April 2007 to a high of 4.8 percent throughout most of 2009 and 2010, when the national unemployment rate peaked at 10 percent.

The unemployment rate in the Omaha metropolitan area was hit harder, however, peaking at 5.9 percent in January of 2010. As of this past July, Omaha’s unemployment rate stood at 3.6 percent, while the state rate has hovered around 3 percent for the past two years. Lincoln’s unemployment rate hit a low of 2.2 percent in November 2015, but was up a full percentage point, to 3.2 percent, as of this past July.

Sources: Areavibes, Attom Data Solutions, Bureau of Business Research, City of Grand Island, City of Seward, CoreLogic, Federal Reserve Bank of Kansas City, Grand Island Convention & Visitors Bureau, Home Snacks, Huskers.com, Julyfourthseward.com, Movoto Blog, Nebraska Department of Economic Development, Nebraska State Fair, Omaha Area Board of Realtors, U.S. Bureau of Labor Statistics, U.S. Census Bureau


 

3 Cities to Watch

Seward

This small town of 7,000 people just 25 miles west of Lincoln is rated as the No. 1 place to live in Nebraska on several online rankings due to its low crime, tax and unemployment rates and a median household income over $56,000. Seward draws 40,000 people every year to one of the largest small-town Independence Day celebrations in the nation.

Lincoln

Lincoln, Nebraska

The Nebraska state capital is probably best known as home to the University of Nebraska Cornhusker football team. On game days, the 85,000-seat Memorial stadium essentially becomes the third largest city in the state. Lincoln itself is the second-largest Nebraska city. It boasts a median household income close to $50,000 and a cost-of-living index that is 11 percent lower than the U.S. average.

Grand Island

Nebraska’s fourth-largest city was named for an island in the nearby Platte River originally discovered by French fur traders. Founded by German settlers in 1857, Grand Island grew in importance as the railroad and gold prospectors headed west. Today, Grand Island serves the needs of some 200,000 residents in the surrounding rural counties and is home to the annual Nebraska State Fair.



 

What the locals say

“The biggest obstacle we are facing is inventory, especially in the first-time homebuyer price range. Current home values are being driven up by high demand, especially in the $125,000 to $250,000 price range. We are also seeing an abundance of luxury homes (not the typical home type in Nebraska) for sale, about four times more than the previous year’s average.”

r_2016-11_Spotlight_local
Lynette Staley,
President,
Capital City Mortgage Inc.






 

Will McDermott is managing editor for Ask a Lender. Reach him at willm@scotsmanguide.com or (800) 297-6061.

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