Fargo -- Homes on the Range -- Not Foreclosed

Simple financing principles and common sense about its economy have benefited North Dakota. Is there any reason the remaninder of the nation should ignore the lessons this state offers? It looks like the good people of North Dakota borrow no more than they can repay and they develop businesses that make the most of local resources.

Why North Dakotans Make Their Mortgage Payments

By James R. Hagerty

Because I grew up in Grand Forks, N.D., I like to tell my boss how well North Dakota is doing in terms of home-mortgage performance.

The latest quarterly report from the Mortgage Bankers Association shows that my state had the lowest percentage of mortgage borrowers who were 90 days or more delinquent (but not yet in foreclosure) as of March 31: a mere 1.15%. That compares with a national average of 4.91%, with 9.20% in Nevada, the worst performer. Even our rivals in South Dakota were far behind us at 1.69%. So what if they have Mount Rushmore.

When my boss asked me why North Dakota was No. 1, I explained that we were more sensible than most people and didn’t buy things we couldn’t afford. She thought it might be slightly more complicated than that. So I made a couple of calls.

“North Dakota’s economy has fared pretty well,” said Rick Clayburgh, president of the North Dakota Bankers Association in Bismarck. (The Clayburghs are old friends of my clan back home, and his brother was briefly my dentist, but I stand by my source.) The economy is benefiting from a boom in oil, coal and wind energy. The energy business is “going gangbusters,” Mr. Clayburgh said. Prices of our agricultural commodities have come down, but the farmers are still “doing OK,” he said.

North Dakota’s unemployment rate is around 4%, less than half the national average. Hey, you don’t move to North Dakota to loaf in the sun. You move there because you found a good job–and perhaps because you love the great outdoors, even when it’s 40 below.

Next I thought of Mark Zandi, chief economist of Moody’s Economy.com, who made his name by being able to make astute comments on demand, not only about the national economy but about the backwoods, the bush, the hinterlands and the deepest boonies. I decided to put Mr. Zandi to the test by asking him to explain why North Dakotans were such reliable repayers of borrowed cash. He didn’t hesitate.

North Dakota avoided the entire housing bubble and crash, he explained: “It is difficult for speculation to infect the North Dakota housing market as there are no supply constraints on home builders, who can quickly put up homes if there is any increase in housing demand and prices.”

It’s true there is plenty of open space; the first time my wife, a native of Hong Kong, visited North Dakota, she looked around with complete bafflement and asked why we weren’t doing anything with all that empty prairie. I once calculated that if North Dakota were to match the urban population density of Hong Kong, we would have room for eight billion people. We might even attract a few good Chinese restaurants. As it is, our population is about nine people per square mile; in New Jersey, it’s 1,171, including mobsters.

Another reason we skipped the housing bubble, Mr. Zandi said, is that “subprime lenders probably bypassed North Dakota as the mortgage market is too small to cover the costs of setting up a lending operation,” Mr. Zandi said. OK, maybe that was just our dumb luck. But Mr. Clayburgh added that in North Dakota both home buyers and banks tend to be conservative about mortgage loans.

So I was right after all: We are pretty sensible.