Real Estate Is Picking Up, Examiners Tell the FDIC
WASHINGTON - Real estate markets are beginning to rebound, brightening the banking industry's prospects, FDIC Chairman L. William Seidman said on Tuesday.
Releasing the Federal Deposit Insurance Corp.'s second quarterly survey of real estate trends, Mr. Seidman told a group of reporters that "conditions in general are improving." The survey of 500 bank examiners and liquidators also found that the tightening of credit standards for construction loans has leveled off.
If the good news on real estate holds, Mr. Seidman said, the Bank Insurance Fund's losses from bank failures will be lower that previously projected. "That would be a very important factor in the cost to the insurance fund," he said.
Mr. Seidman has forecast that the fund could be $3 billion or more under water by the end of 1992, depending on economic conditions.
Most Regions Rebounded
According to the FDIC survey, both commercial and residential real estate markets improved in most regions of the country in the three months ended in mid-July.
The West was the big exception. Respondents said commercial real estate values there are still falling.
Mr. Seidman noted that the real estate markets in Northern California are performing well, while "things are not improving" in Southern California.
"The West Coast is a mixed picture," he said.
The results, nonetheless are encouraging because a first-quarter survey released in May showed that residential markets were improving while commercial real estate values were still falling.
The FDIC said the oversupply of office space is worst in Hartford, Conn.; Washington; Albuquerque; Long Island, N.Y.; and Boston.
Fewer Signs of a Crunch
Claims that there is a credit crunch lost some credibility as the FDIC survey showed that residential and commercial real estate lending grew $68.4 billion in the 12 months ended March 31.
Real estate loans now account for 25% of the assets held at commercial banks. Half are home mortgages and almost a third of the real estate loans are secured by commercial property.
Residential real estate lending grew $48 billion, or 13.4% to $406 billion in the 12 months ended March 31, according to the FDIC. Commercial real estate lending expanded $20.4 billion, or 9.2%, to $242 billion during the period.
While credit is being extended in residential and commercial real estate markets, banks are pulling back on construction and development lending.
The FDIC reported a $11.5 billion, or 10.4%, decline in these loans during the year ended March 31. Outstanding construction and development loans, the loans causing banks the most financial problems, total $122 billion.
Mr. Seidman attributed much of the real estate loan growth to extensions of loans, known as "mini-perms," that banks had intended to be short term.