Realty Storm Batters D.C. Region While Easing in Some Parts of Nation
The real estate problems ravaging many U.S. banks for the past two years are venting their full fury on the District of Columbia while easing a bit in some other parts of the country, analysts said.
"The D.C. area is the worst. It is still plunging, as far as I can tell," said Felice Gelman, a banking analyst at Dillon, Read & Co. in New York.
"Washington is clearly the worst U.S. market," added Nancy Bush of Brown Brothers Harriman & Co. The deterioration is continuing at a time when bankers in other part of the nation are seeing signs of stabilization, she said.
One of the latest signs of trouble in the Washington area was C&S/Sovran Corp.'s announcement that its D.C. and Virginia banks had signed regulatory agreements with the Office of the Comptroller of the Currency - an enforcement action showing regulatory concern about the banks' credit quality and capital strength.
Regulators also are closely watching Baltimore-based MNC Financial Inc., another bank that is also active in Washington and its suburbs.
U.S. banks' problem real estate assets rose 12% in the first quarter, to $26.9 billion, after rising 81% in 1990. Problem assets are not expected to peak for several quarters, Oppenheimer & Co. analyst Cheryl Swaim wrote in a recent report.
While Washington is now feeling the storm's full fury, the problems have not yet ended in the Northeast and Florida, where real estate has been sharply devalued. Commercial real estate has weakened more than residential, in which there are some signs of recovery.
"The Northeast is still looking like it is deteriorating, but the question is: At what rate?" said James McDermott, president of Keefe, Bruyette & Woods Inc., New York. "We anticipate plenty of commercial real estate problems in the Northeast in the foreseeable future, but not at the rate it has been at."
More pessimistically, Carole Berger of C.J. Lawrence, Morgan Grenfell Inc. said, "It looks like New York is going to get dramatically worse. Real estate developers tell me that rents continue to drop like a stone."
"New Jersey is improving somewhat, in both residential and commercial," said Ms. Gelman of Dillon Read. "The Midwest has some softness but less than elsewhere, and Texas is fine."
Ms. Gelman said Colorado is "starting to pick up," but she was less certain about California, which is viewed from the East as "terrible." She commented, "People in the West say Easterners are just jealous."
"California will continue to have more problems, but on a lower scale than New England," said Mr. McDermott of Keefe Bruyette.