Construction Lending in County Falls : Slump: The decline, fueled by consumer concerns about the economy and the Mideast, signals a troubled local building industry, a research group says.


A regional research group said Wednesday that construction lending in Orange County in August fell to its lowest level since February, providing further evidence that the local building industry is on a downward slide.

Sensing a drop in consumer confidence about the economy and concerns about the Middle East situation, lenders pumped only $170 million into the building industry in the county last month--down 50.9% from August, 1989, according to Dataquick Information Systems in San Diego.

Statewide, only $1.5 billion in construction loans was made in August, the lowest level in at least 20 months. The state total was 42.2% lower than in August, 1989.

Loans that were funded went to all types of builders--from major firms to small independents putting up a single home or office building on speculation, Dataquick said.

"It's obvious that the situation in the Persian Gulf has made the financial markets very nervous," said Donald L. Cohn, Dataquick president. "A lot of deals just aren't being made right now or are being put on hold."

But the drop in lending is also a function of the continued problems of the savings and loan industry, once a large source of construction lending.

"It is a slow market overall," said John Duncan, chief financial officer of the Fieldstone Co., a Newport Beach residential builder. "Builders are not seeking money to build new projects, and those who traditionally used S&Ls; for loans don't have a source of money today."

He said the financial situation is widespread, affecting commercial and industrial builders as well as residential firms. Duncan said most major markets in California have sizable inventories of vacant commercial and residential properties to underscore the downturn.

Orange County actually fared better than some areas of the state in attracting construction funds during August--only Los Angeles and San Diego counties pulled in more money. And the percentage of decline from loan totals for August, 1989, was higher in Los Angeles, Ventura, Contra Costa and San Mateo counties.

In a related report, Dataquick said that real estate lending of all types--which includes mortgage loans, home equity borrowing and other loans using real estate as security--dropped to just under $2.1 billion in Orange County in August--down 18% from a year earlier.

Statewide, 38,269 first trust deed loans were made in August, down 12.3% from August 1989. The $5.9 billion value of the loans was 12.8% lower than a year earlier.


Lending by financial institutions for all types of construction in Orange County was off 50.9% in August from the level of a year ago.

In millions of dollars:


Jan: 186

Mar: 679

May: 459

Oct: 452

Dec: 670


Mar: 305

Jun: 484

Aug: 170

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