Real Estate Credit is Like Bad Medicine

As little as a year ago putting together a line of credit for a real estate developer was a simple task. If the developer had a heartbeat and could sign his name he was overqualified. "We don't need no stinking collateral!" we'd say and then the bank would trip over themselves to get the money out the door as quickly as possible, not really stopping to care about what the security for the loan would be.

Getting that same line today is nearly impossible, even if the developer actually used his previous loans to develop the properties he said he would; and let's face it, that didn't happen very often. 

So what are we left with? A market with retreating property value, investors with lower net worths, and a few parcels of land partially improved but not able to be completed. The lack of financing and overall market depression has everyone running for cover and blaming everyone who hasn't taken cover, especially the government-who I would argue is currently our life support.

The question I pose is this: Would we (as developers, brokers, agents, individuals, etc) have tempered our own aggressive borrowing, during those years when credit was so easy to come by, knowing it would eventually limit our borrowing capacity in the future? I doubt it, and I think the peaks and valleys of our history would back that statement up.  Temperance would show a straight line in the market, and that's just not how we work.

Sometimes medicine doesn't taste so good, but you don't blame the doctor for prescribing it.