To many it seems that Louisiana has escaped the economic problems experienced by the rest of the nation. We have certainly seen our share of tighter lending and slowdowns, but it just doesn’t seem to have been as bad as elsewhere. And we are now hearing about some regions recovering, evidenced by new building and investment. The national banks came through their stress tests in better condition than most predicted and are starting to lend again.
So is the worst of it over? The answer depends on who you are.
If you are a homebuilder with a good financial statement and several contract houses ahead of you, things are probably looking up. Financing is available for qualified purchasers and the banks are open to lending on contract homes. It’s a different story if you are hoping to build a number of spec houses, however, since that money is still in the deep freeze.
If you are a real estate investor sitting on long-term, fixed-rate loans and properties that are servicing that debt, you are doing fine and will continue to do so. If you are an investor with several loans that were made during the days of easy money that are now coming due, you might have tough times ahead as banks will not be willing to renew those loans at the same advantageous terms. Your options are to pay down the debt at the same level or find a new lender, or to try to sell the property to someone with ready cash.
If you are a bank with a large commercial real estate concentration that has not been visited by your respective regulatory agency, you might have some tough times ahead, though I think most of our banks will do well in such examinations.
I could go on with dozens of examples of whose future is bright and whose is not so bright, but the point is that our futures are not all the same. And I think it is an important point because history tells us that when the economy begins to recover we will see more business failures as the stronger performers pull away from the weaker ones. But we should remember that a failure by one player in the market does not mean that all players will follow suit.
Many economists told us that we would start to see some recovery in the second half of the year. That time is almost upon us. It could be an interesting time for everyone.
(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.)
