Surreal Estate

It’s almost surreal to watch the national real estate picture playing out. A year ago, we premiered the film at Sundance. I remember telling our film sales rep about the weird parallels between what is being called the subprime crisis and the S&L crisis. He was completely cool, politely listening to my raving, but I couldn’t help but think I came off like those dudes who rants about the gold standard. (Oh wait, I am that guy.)

Anyway, so flash forward almost exactly a year.

  • Countrywide’s stock is dropping like a bunker buster.
  • Bank of America, already $2B deep into Countrywide, offers to buy them out BEFORE they crash.
  • The Fed unveils entirely new instruments to provide liquidity to troubled banks without having to clue us in as to which banks have, to use a Dad term, “a big stinky.”
  • Sovereign Wealth Funds are picking up big chunks of cornerstone US financial institutions

Real estate woes are front page stories, week after week. People expect before this is over that we’ll see bank failures, maybe even big banks. Foreclosure rates hitting record levels. Homebuilders, banks, ratings firms, all class of businesses are being hit by this. It’s an absolutely bizarre time to be opening the film. If nothing else, the front page nature of this mess only makes the film seem more timely.
Far smarter and more insightful people have written at length on this subject. Rather than rehash and paraphrase their insights (and surely dilute them) I’m just going to link to some of the more interesting articles of late.

The Chicago Tribune is telling a story that’s happening about 60 minutes from where I live, in booming Will County Illinois where miles and miles of cornfields were turned into miles and miles of houses. It had to end and so it did. Now many are Trapped in a troubled real estate market.

One of the nation’s fastest-growing counties in recent years, Will County now has the highest foreclosure rate in Illinois and its housing market has come to a standstill. Yet where California or Florida can blame out-of-sight prices, and Ohio or Michigan their shrinking economies, Will County remains affordable and growing even as its residential for-sale signs multiply.

My Comment: Obviously Will County is not affordable. Evidence is twofold. Will County has the highest foreclosure rate in Illinois and for sales sign are multiplying like rabbits.

Growth of houses exceeded growth in jobs. Wages did not keep up. It was an artificial boom. Driving around I have been wondering for years “How can everyone afford to live like this?” Here is the answer. They can’t. That shiny new SUV parked in the driveway may signal trouble, not prosperity.

This really is just a start. I strongly recommend plumbing financial sites like Mish to draw a sharper bead on this mess.

January 14, 2008 | Filed Under Economy, News

By Jef |

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