At a time when the headlines scream of tightening credit and stingy bankers, it appears that things here in Baton Rouge are bucking the national trend. A recent article in the Wall Street Journal indicated that fourth quarter 2008 consumer loan balances in the Baton Rouge area were 5.45% higher than the same point last year. Consumers in this area are still able to borrow money for major purchases, and that is good news.
The major trend that stands out from the Journal article is that midsize communities are “riding out the recession better than big cities and rural towns.” These communities “tend to have less cyclical, more stable economies where fewer households are in distress and where there may be greater willingness on the part of banks to lend.”
To be clear, however, let’s not assume that Baton Rouge is immune from the nationwide recession just because consumer balances are increasing. The Journal article cautions that increases could indicate “the sort of reckless borrowing that contributed to the current crisis, of desperation borrowing as bills become more difficult to pay.”
So what is reality in Baton Rouge? Are our balances up because we are drawing on existing lines of credit, maxing out our credit limits to keep other bills current? Or are we truly in better condition than other communities across the nation?
Recent economic reports indicate that employment is strong in Baton Rouge with job creation still positive, so our citizens are still drawing paychecks. And despite what you might assume about the market, we did not succumb to the overbuilding experienced in other parts of the country. Our home inventories increased, but we are in a manageable position and working through the excess supply. Finally, our citizens did not experiment in great numbers with adjustable rate mortgages or subprime lending, and default/foreclosure rates are low.
It is my belief that we are doing “OK” here in Baton Rouge. Not great, but not poorly. The Journal article also mentions Lafayette, where consumer loan balances are up 8.79% year over year, so the good news I shared with our neighbors to the west.
The banks have tightened credit but they are lending. We all have reason for optimism so long as we stick to disciplined spending and responsible borrowing.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)
