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From the Editor
In Focus This Quarter
High Loan-to-Value Lending: A New Frontier in Home Equity Lending--High loan-to-value home equity loans have grown in popularity as consumers have sought ways to consolidate credit card debt and lenders have sought ways to deal with declining profit margins on traditional home equity loans. High loan-to-value loans pose unique risks for lenders because of their hybrid nature: they combine characteristics of both a secured home equity loan and an unsecured consumer loan. Losses on such loans are increasing rapidly, and the current rate of loss raises concern about how these loans might perform in an economic recession.
By Diane Ellis
Commercial Development Still Hot in Many Major Markets, but Slower Growth May Be Ahead--Following the experience of the 1980s, the threat of an oversupply of commercial real estate is watched with keen interest by market participants and observers alike. This article highlights nine metropolitan areas that may be vulnerable to overbuilding based on the rapid pace of development occurring within those markets, various indicators of current and prospective demand, and projections by credible industry analysts. These concerns could be mitigated to the extent that reduced credit availability within the capital markets leads to a slowing in construction activity.
By Steven Burton
Recent Trends in Syndicated Lending--A strong U.S. economy, intensifying lender competition, and increasing marketability of bank loans have driven record volumes of syndicated lending in the 1990s. These factors led to several years of liberalized underwriting in the syndicated market. While evidence suggests that some banks have tightened standards and terms for loans to large commercial borrowers, market developments and underwriting trends over the past several years have implications for credit quality, earnings, and liquidity at institutions that hold or originate syndicated loans.
By Steven E. Cunningham, Ronald L. Spieker
Several of the Region's Metropolitan Areas May Be Vulnerable to Overbuilding as a Result of Rapid Commercial Real Estate Development--Rapid commercial real estate development in Las Vegas and Phoenix continues unabated, raising concerns about overbuilding
Slowing economies in Salt Lake City and Portland may be a sign that the recent strong growth in commercial real estate development may be subsiding
Most community banks with construction loan concentrations are now located outside of California
In particular, Salt Lake City, Las Vegas, and Portland community banks as a group have much higher construction loan exposure than their community bank peers in other markets.
By the San Francisco Region Staff