Over the weekend the news media reported better than a 10% increase of bankruptcy filings this year in Oregon and Washington State, attributing them to builders, contractors and developers suffering from mortgage market woes. But I must disagree. The last 18 months have been increasingly tough for real estate sales and I think the current mortgage conditions were just the final straw.
I've observed standing inventory in many new developments just sit there for at least a year while the builder continues to build. Without sales, the builders are just living off the draws of their construction loans and it was only a matter of time before they hit the bottom. While lenders are analyzing their policies towards mortgage loans they should really take a close look at their construction loans too!
A Tech-Consulting Broker serving REALTORS, agents & brokerages in the Seattle Metro area and all of Washington State. Larry is the founder of nwRealty.Net, Inc & nwRealty.Com.
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Larry... You are right on. Other factors are development loans. Developers plan on these loans to take down contracted land releases, and to create cash flow. In our area not many subdivisions are up for sale yet, but that time is coming.
Another issue is that most of the consumer loans are through mortgage companies, are securitized, etc. Most of the construction loans are through the commercial loan department of the BANK. It is a totally different animal with different ruls and different decision making proceedures. Overall, the process is more businesslike.
Thanks Chris & Rich ... it will be interesting to see how things play out on the commercial lending side.