Tuesday, June 17, 2008

Construction loan delinquencies rising

Construction loans, as we all know, can be very risky. That is even more so in a softer market. Condos and single family residential appear to be the big, big culprit here (13.6% and 10.8% respectively), but even commercial deals have risen, albeit from a really low 2.2% to 3.6%. Here the Crain's story by Eddie Baeb. I don't know if Eddie is Corfman's protege but he's doing a nice job writing about our market. (Full Disclosure Department: he has written complimentary things in the past about some clients.)

Why the discrepancy? Again, I go back to Father Guido Sarducci's Five Minute University. Supply -- demand. Next subject.

Single family and condo product overbuilt, big time. And some developers got into product they now admit was wrong. KB Homes building mini-mansions is a great example of this. They are finding their way again. Others won't be so lucky.

Generally speaking, commercial product does not suffer from the same phenomenon. As I've said before, they learned that lesson in the 80s and 90s. It is not being repeated here, at least from what I see.

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