Real Estate Prices, Loans and Sales Decline in 1990 : Finance: Commercial and residential lending in the county dropped 18%, largely due to the gulf crisis and the recession.

Real estate lending in Orange County last year dropped 18%, one of the biggest declines of any California county. The drop was attributed to the Persian Gulf crisis, the general economic slump and turmoil in the banking industry.

From $28 billion worth of loans in 1989, real estate lending in the county fell to $23 billion last year, according to a report from Dataquick Information Systems, a La Jolla market research firm.

Across the state, the decrease was about 9%, from $231 billion to $210 billion, Dataquick said. The figures include all types of real estate lending, including commercial and residential.

Lending kept pace with 1989 for much of last year but dropped sharply after August. That was about the time that some economists say the nation’s economy slipped into recession, and it was in early August that Iraq invaded Kuwait.

In fact, Dataquick said, the recession and the uncertainty caused by the crisis in the Persian Gulf were major causes of the decline in lending. The other major reason: The banks themselves tightened real estate lending under prodding by federal regulators anxious to avoid another financial crisis like the one that hit the savings and loan industry.

“Even if a developer has a good deal that he could ordinarily get a loan on, the comptroller of the currency has got such a lock on the commercial banks that he’ll have a tough time getting (the loan),” said Alfred J. Gobar, a Brea real estate consultant.

Dataquick officials didn’t seem too discouraged by the figures.

“Once the new rules of the lending game are in place, a lot of the well-planned projects that currently are on hold will get financing,” said Dataquick President Donald L. Cohn.

Also showing sharp declines in lending were Ventura County, down 22%, to $5.5 billion from $7 billion; and Monterey County, down 23.5%, to $2 billion from $2.5 billion.

Los Angeles County had a decrease of only 5%, to $61 billion from $64 billion; San Francisco, the state’s second-largest urban area, dropped 16%, to $4 billion from $5 billion.

Lending in the Central Valley counties, including Sacramento, actually increased by 3%. The state’s other regions dropped.

In Orange County, high prices hurt sales of more expensive homes during the year. Builders subsequently constructed fewer houses, meaning there were not only fewer mortgage loans made but also fewer development loans for builders.

As the amount of empty office space in the county has risen to more than 10 million square feet, fewer office buildings have been built recently.

And while some big office buildings are for sale, few are being sold. The result is less lending in the commercial real estate market.

Scarce credit has created a domino effect, said consultant Michael Meyer, managing partner of Kenneth Leventhal & Co.’s Newport Beach office. “A lot of companies have had to put buildings on the market prematurely,” he said. “That causes prices to spiral down and reduces the value of the buildings.”

REAL ESTATE LOANS

Real estate lending dropped sharply last year, with Orange and Ventura counties being hardest hit in Southern California. The drop was strongest in the last quarter, fueled by the Persian Gulf crisis, the economic slowdown, and bank and thrift industry restructuring. (Dollar figures below are in billions.)

% Change County/Region 1989 1990 from ’89 Los Angeles $63.8 $60.6 -5.1% Orange County 28.0 22.9 -18.4 Riverside 13.2 12.0 -9.1 San Diego 21.8 18.7 -14.0 San Bernardino 11.0 10.2 -7.8 Ventura 7.1 5.5 -21.8 S. California 144.9 129.9 -10.4 California 230.7 210.4 -8.8

Source: Dataquick Information Systems