From the WSJ: Condo Troubles Further Squeeze Property Lenders
For the nation's real-estate lenders, the other shoe may be about to drop: condominiums.So many shoes are dropping, the turmoil will be named Imelda!
Alreadyplagued by rising home-loan defaults and foreclosures amongoverstretched consumers, major markets across the country -- includingparts of Florida, California and Washington, D.C. -- are seeing risingforeclosures and bankruptcies of entire condo projects.Kudosto WSJ journalist Alex Frangos for not blaming the problems on subprimeloans. These "loose" lending standards were pervasive in C&D(construction and development) and CRE (commercial real estate)lending, in addition to residential real estate.
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Typically,condo developers are required to pay off construction loans shortlyafter construction is completed. But with sales stalled, moredevelopers are defaulting, creating headaches for banks and real-estatefunds that financed the projects.
Delinquencies on condo-construction loans have already jumped to 4% from 1% over the past year. ...
Underlying the defaults was a loosening of lending standards.
