By now you’ve heard that CIT Group has filed for Chapter 11 bankruptcy protection. Taxpayers, who gave the company 2.3 billion last year, will likely not be re-paid. I’m not discounting that, but even worse, CIT is one of the country’s largest lenders to small business and retailers, like Neiman Marcus. Two months prior to the holiday season is not a great time for retailers to lose access to capital. My concern is how this will trickle down: small and mid-size businesses will not be able to fiance short-term surges, which will seriously affect their business models, and commercial real estate may take another bullet. We have seen the effects of the credit crunch in real estate, now we’re going to see it in the retail industry, which is in everybody’s face on a daily basis. Consumer confidence? You see where I’m going with this: we’ve had 60,000 home foreclosure postings this year.
I so do not like being Debbie Downer, truly, but the prognosis isn’t looking too positive. Your thoughts?
Update: Today’s New York Times downplays the disaster scenario I envisioned last night. Apparently this is a pre-packaged, “different kind of bankruptcy” that allows the company to re emerge from court protection by the end of the year, which is a pretty speedy recovery.
Why our market seems to be in the doldrums, check out this editorial by Peggy Noonan. All the grown ups are gone. She details a national malaise that is the basic reason why people aren’t buying and selling (real estate or anything) in this country. One agent told me he has a client who wants to buy a home in Dallas but has to wait first for her home in Chicago to sell, and it ain’t moving. A woman in my Real Estate class last week told me she has a home in suburban Chicago that costs her $4000 a month, she’s got a tenant in there paying $1800. Our market is the high spot in the nation, and would be so much better if transplants who want to buy here could. People come here from Detroit and think they can buy a house for 20 cents on the dollar.
And that, dear readers, is how the national real estate malaise hurts us.