Lenders giving yellow light to new construction

Houston Business Journal - by Nicole Bradford

Under the threat of an economic recession and with much of the country's real estate market near a grinding halt, financial underwriters in marginally affected Houston say they are now, more than ever, keeping an eye on unsold inventory.

Local commercial real estate experts say they expect Houston's market to slow down slightly from last year but are cautiously optimistic about 2008 (especially in industrial and warehouse projects). But a nationwide subprime mortgage crisis coupled with an economic downturn means even more caution for residential lenders, who are staying focused on move-ups, higher-end homes and the increasingly in-demand urban living projects inside Loop 610.

"We tend to finance custom builders who build 10 to 100 homes per year as opposed to those builders who build several thousand per year," says Joe M. Bailey, chairman of Texas Capital Bank, Houston. "Most of the slowdown I've seen is in the lower-priced housing, so the move-up homes really haven't been affected that much. The type of houses we finance are still selling. A really hot segment right now is older, mature neighborhoods such as Briargrove and West University where you have tear-down houses."

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