DALLAS - Anyone who thinks that the two-year-old financial crisis in
Texas could not get much worse needs to take another look at the real
estate markets in the state's biggest cities.
Property foreclosures and past-due mortgage payments are still
rising at alarming rates in the nation's third-most populous state.
If recent trends continue, the crop of buildings or raw land picked
up from defaulted loans could nearly double, to about $20 billion
this year, with savings institutions accounting for about $15
billion of that amount.
At the end of 1987, Dallas and Houston had a total of 82 million
square feet of vacant office space. That is more than enough to
house all the office workers in Atlanta, the nation's 10th-largest
The situation is especially dire in Houston, where 31.8 percent
of the office space is now vacant, the highest percentage in the
country, according to the Office Network, a national market-research
firm based in Houston. Given this glut, the Houston metropolitan
area is unlikely to require much new office space until the next
In Dallas, where 29.1 percent of existing space is empty, the
situation is only slightly better. Businesses filled an additional
four million square feet last year. At that rate, it would take
eight years to occupy what already exists. But many buildings are
either so poorly situated or so shoddily built that they will
eventually be razed, many people in the real estate industry say.
The residential market is not nearly so depressed. Still, the
Houston area leads the nation in mortgage defaults, and average home
prices in Houston and Dallas declined by more than 15 percent last
With the overall markets of other big Texas cities like Austin,
San Antonio and Fort Worth also in shambles, many analysts and
executives believe that the heavy real estate losses suffered by
Texas banks and savings institutions will continue to mount well
into 1989 and perhaps beyond.
``We've got a long way to go,'' said Richard W. Fisher, a Dallas
investment adviser who was a high-ranking Treasury official in the
The First RepublicBank Corp. became the latest casualty last
week, when real estate-related losses forced that bank holding
company, the state's largest, to seek $1 billion in government aid
to quell a runoff in deposits. Its past-due real estate loans
soared to $2.1 billion by the end of last year, up from $212.4
million at the end of 1986.
In the wake of the state's building binge earlier in this
decade, along with the economic problems resulting from a steep drop
in oil prices, all but one of the seven largest banks in Texas have
been forced to seek government bailouts or mergers with out-of-state
institutions. Of the state's 281 savings institutions, 104 are
technically insolvent, largely because of the weak real-estate
Without a huge government bailout - one that could cost at least
$25 billion - many experts are pessimistic that the spreading
debacle can be contained anytime soon.
Fisher said he feared that regulators at the Federal Savings and
Loan Insurance Corp. and the Federal Deposit Insurance Corp. are on
the verge of becoming overwhelmed by the billions of dollars' worth
of foreclosed property coming under their control in the Southwest.
His big concern is that the agencies will wait too long before
deciding to sell large amounts of property in a short period, taking
whatever price they can get and further depressing the market. …