Lower Oil Prices Affect Reigning in State and Local Debt?

Tea Party wants to reign in state and local debt to increase government finance transparency. It’s on every other op-ed/press release. Dallas Morning News examines whether lower oil prices affect Texas debt and equity markets.

• Short answer- don’t know yet.
• Best answer- so far; there’s no sign of an impact on lending.
• Concerning Answer: money people are talking about it. 

It’s a toss up whether underwriters will increase scrutiny on debt and equity markets in Texas after lower oil prices. The pros & cons:

• Con: Knee Jerk Reaction:
  • “There is a knee-jerk reactions to do that,” said Stuart Wernick, senior vice president of Dallas-based Berkadia Commercial Mortgage LLC. “I was in Miami last week at a conference, and two guys came up to me telling me, ‘You are in Texas, right? It’s going to be tough.’  “They said they are going to be more stringent in their underwriting.”
• Pro: No Current Impact: 
  • Anne Raymond, managing director of Crow Holdings, said investors will be discerning in their evaluation of the nuances of Texas’ real estate markets.

    “Of course, it is very early to understand the implications of the falling oil prices,” she said. “To date, however, we have experienced no concern from lenders and equity partners for deals in Austin or Dallas.

• Con: All of Texas is the Same:

  • “People lump the whole state together in terms of energy,” said Mark Dotzour, chief economist at the Real Estate Center at Texas A&M Univeristy. “Some underwriters may scrutinize loans in Texas more.

    “There are a lot of people who only read the headlines, and if they do, they will think Texas is in trouble.”

Dallas Morning News