Baton Rouge Real Estate News

Brian Andrews: Misreading foreclosures

Headlines in the national press would lead most observers to believe that residential foreclosure levels are at historic highs from coast to coast. The truth of the matter is that while foreclosure levels are high, the lion's share are limited to certain geographic areas that do not include Louisiana.

According to a recent report by the Mortgage Bankers Association, new foreclosure rates in the third quarter of 2007 were the highest in Nevada, Michigan, Ohio, Indiana and Florida. The mortgage type with the highest default rate, adjustable rate subprime loans, is the worst in California and Florida, which together account for 33.8% of all foreclosure starts in the category. Previous data implies that if you take out the top five or six states in terms of foreclosures, the remaining states are fairly stable.

There is no doubt that there were subprime loans made in Louisiana that have gone or will go bad. It appears, however, that the levels are consistent with previous years and certainly not the epidemic level being experienced elsewhere.

The unfortunate consequence of the mistaken impression that foreclosure rates have spiked in Louisiana is that local homebuyers are delaying purchases, thinking that prices will drop as lenders take back properties. I just do not see this price drop occurring in the Interstate 10/12 corridor and I feel that homebuyers are unnecessarily delaying purchases.

With interest rates continuing to be at historically low levels and home prices returning to pre-Katrina levels, creditworthy homebuyers really have no reason to wait out the South Louisiana market. If, however, you are looking for a steal of a deal, considering picking up a foreclosure in Flint, Mich. You might want to wait until the temperature gets above freezing.

(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)

Poll: Most don't expect slowdown in B.R. commercial activity

Major national retailers are cutting back on store openings and planning to close locations because of the sluggish national economy, but Real Estate Weekly readers don’t think the slowdown will affect Baton Rouge. Forty-eight percent of the people who responded to an online survey say commercial construction in the Capital Region will not be affected, while 43% think it will. Nine percent say they don't know what will happen. More than 100 people participated in the survey.

Today's question: Have you noticed a rise in construction costs as a result of the traffic impact fees in East Baton Rouge Parish?   To Vote, Click Here

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Traffic impact fees being collected; builders unhappy

Since the new traffic impact fee schedule was implemented by Mayor Kip Holden in late summer, the city-parish has collected $95,678 in permit charges from small residential and commercial projects. Many projects didn’t pay anything under the old fee system, which allowed commercial projects that are less than 30,000 square feet to be built without paying a fee -- even though many of these projects boosted the traffic on city-parish roads.

But Passman Homes owner Jerry Passman says the new fee schedule is unfair to businesses and homebuyers. "These are all taxes that get passed on to the end user. It's unfair to buyers that need property." Passman says there is a need to raise more money to fix parish roads, but said a wheel tax would be a better solution, since the money could be used for fixing old roads and older problems, as opposed to the impact fee, which must only go to new projects.

Passman says the fees that homebuilders pay are being passed directly onto buyers -- and at a slightly higher cost. While the traffic impact fee for a single family home might be $800, it ends up getting marked up by the standard 12% to 15% profit margin for builders and 5% commission for Realtors. "So you're talking $950, and that’s before you put that into a mortgage and pay interest on it for 22 or 23 years," he says. "That's one of the points that the homebuilders have tried to make." --Timothy Boone

Source: Baton Rouge Business Report Weekly Real Estate Report