Academic journal article ABA Banking Journal

Real Estate Borrowers Can't Go Home Again

Academic journal article ABA Banking Journal

Real Estate Borrowers Can't Go Home Again

Article excerpt

Two surveys released earlier this winter reflect the long-term outlook of people in the real-estate business. it's not a pretty picture.

Nearly three-out-of-four real-estate executives believe it will take their industry at least two to five years to recover. Roughly two-thirds of the group, surveyed by National Real Estate Investor and the Arthur Andersen & Co. Real Estate Services Group, said that residential property values would stay about the same or fall in 1992. These respondents anticipated a decline in commercial real estate values.

Significant point for banks: 68% said that finding financing would be their toughest job in the next few years.

In a second survey, this one conducted by the University of California at Los Angeles, real-estate developers were even more discouraged about financing. The vast majority (82%) said that normal lending policies had grown more restrictive. Just 38% of the developers said that banks and insurance companies were likely sources of credit. That compares with 95% a year earlier, when the university conducted its first such survey.

What's to be done?

Tax reform needed. ABA has advocated a number of tax changes to promote real-estate construction and help banks make more loans to creditworthy consumers and businesses. in a letter to Treasury Secretary Nicholas Brady, ABA President Alan R. Tubbs wrote that 'improvement in savings and investment is the key to enhancing productivity and obtaining a higher living standard and should be the focus of any economic, policy debate.'

ABA proposed that individual retirement accounts be expanded to stimulate first-home purchases and made other recommendations to spur economic growth. For example, ABA said the government should revise or eliminate bank transition rules for net operating losses, and provide the same tax treatment for foreclosures by banks as already enjoyed by thrifts.

ABA noted in the letter that efforts to help stimulate the economy should be revenue-neutral, and not add to the growing federal budget deficit. …

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