As the smell of the oil spill meanders onto the Gulf Coast, it’s easy to be reminded of the not too distant memories of Katrina and wonder if this will be yet another excuse for ignoring the harsh post-hurricane realities facing the housing market in that area. The AOL-backed HousingWatch put out a piece declaring that the oil spill will damage housing 100 times worse than Hurricane Katrina, as one broker put it. In fact, in times of natural disaster opportunities in real estate abound. Just not the way readers of HousingWatch may envision. So, it’s not an argument against the piece, per se, but rather a question on the scope of the subject’s coverage, as seen through my lens. The oil spill is, of course, a terrible tragedy, but it’s not comparable to the great overwhelming force of Katrina. There are plenty of opportunities for savvy investors, as long as they know where to look. And this can be (and is) broadened to explore similar opportunities in flooded areas along the Cumberland River in Tennessee and Kentucky, in our print publications. In short, the damage to housing from the oil spill is minimal compared to, say, the FHA condo restrictions that have those markets so deteriorated and benumbed already. Not to say there isn’t progress on this front, and Fannie Mae in particular should be commended for its approval team initiative in Florida. And certainly its good news that Walker & Dunlop just provided a $16m Post-Katrina construction loan to Canterbury House Apartments in Baton Rouge. According to the release:
The loan was structured with a forward commitment 30-year term and a 35-year amortization. The loan was underwritten to a 79 percent loan-to-value with a 1.20x debt-service coverage ratio utilizing Gulf Opportunity Zone Bonds and Fannie Mae’s variable rate bond forward commitment product.
“Fannie Mae remains committed to aiding the Gulf Coast recovery and to supporting affordable rental housing and community development,” said Bob Simpson, Vice President of Affordable Lending, Fannie Mae. OK fine, just tell me when Baton Rouge joined the Gulf Coast? Did Katrina erode the shores that far in? Consider that Houston to Galveston is 53 miles. Baton Rouge to Grand Isle is 160 miles.) The population of the capital exploded immediately after Katrina, sure, but why not use Gulf Opportunity bonds to build in New Orleans, so some fellow Americans can move home? And why limit the ability to capitalize on natural disasters? I recommend describing the new project not only as post-Katrina, but “oil spill concurrent” as well. One only need to look at the Cotton Mill development in the Central Business District of New Orleans to get an idea of how frustrating doing business in this environment can be, oil spill or not. Can someone please explain why a prime $1.5million a month turnover development, with half a million dollars in reserve, needs to wait months for FHA approval? So go ahead. Say the oil spill is killing the market for originations on the Gulf. We could all use news on a slow day. But let’s be honest here, it’s been dead for quite some time already. Jacob Gaffney is the editor of HousingWire and HousingWire.com. Write to him.
