Another major housing crash casualty was reported yesterday by The Arizona Republic:
Pinnacle West Capital Corp. subsidiary and once-prominent local developer SunCor Development Co. has filed petitions in U.S. Bankruptcy Court as a final step toward dissolving the company and its remaining subsidiaries.
Tempe-based SunCor Development's board of directors signed a resolution Friday authorizing the voluntary bankruptcy filing, which includes 17 SunCor subsidiaries.
This was another company that was flying high until the bubble burst, sending it plummeting back to Earth:
Incorporated in 1986, SunCor grew to become one of the Southwest's most prominent developers in the 1990s and early 2000s, developing residential communities, golf courses and commercial-real-estate projects.
At the peak of its success in 2005, SunCor had nearly 800 employees, according to Pinnacle West.
The company ran into serious financial trouble in 2008, after the collapse of both the residential and commercial real-estate markets.
And lo, we see the death of yet another company which had the long term viability of a golf course in the middle of the desert.
Of all the various bottom feeders picking at the carcass of what was once a vibrant American economy, for profit colleges are among the lowest of the low. I've post stories on TDS before about how these so-called "institutions" of higher learning will admit anyone who can fog a mirror and fill out a student loan application. A huge percentage of the students never finish the curriculum, but are still stuck with whatever debt they accumulate. Those who do manage to earn their degree often find that it is of little more value than high school diploma when it comes to fining a decent job. All in all, for profit colleges are a perfect example of what happens when predatory corporations are allowed to exploit well intentioned social programs and reap large profits form them.
That's a long winded introduction for this story below from the Pittsburgh Tribune Review about one such august institution now laying off staff:
Education Management Corp. today began laying off as many as 400 workers from locations in the Strip District and in Arizona, as a result of a recent review of its operations.
A, B, C, easy as...oh fuck, what was the rest of it again?
Sorry, I got distracted. Please continue:
At least 70 people who were let go worked at the Pittsburgh company's Online Higher Education business located in the Strip District, according to several workers. Those laid off were escorted from buildings along Penn Avenue late this morning.
Ouch, that's cold. Gee, it sounds to me like they were expecting trouble from those they fired. That usually only happens when the workforce already has shitty morale and they're afraid someone might go postal on them. So what do the corporate flacks have to say for themselves?
A statement from Education Management, which owns and operates for-profit colleges, including the Art Institute of Pittsburgh, said the layoffs would affect fewer than 2 percent of its 20,000 workers, or as many as 400 people.
The moves were "not anticipated to have any impact on students," the statement said.
Other than to greatly reduce the number of positions that might be available after graduation, of course. Because often the best chance the attendees of these schools have to get a job after graduation is to go to work for the institutions themselves. Much as I loathe the way these schools operate, I do feel sorry for those who get conned into attending them. The words "education" and "corporation" should be mutually exclusive (just like the words "news" and "corporation," incidentally).
I've also said before on this blog that the student loan business and higher education in general form yet another unsustainable economic bubble. Might this story represent the first indicator that the bubble is starting to pop? Time will tell.
Until I read the news article referenced below, I had no idea that the reality teevee show, Extreme Makeover, Home Edition, had just been cancelled. Actually, I hadn't even been aware that it was still on the air five years into the housing crash. To say I wasn't a fan of the show is an understatement. People were drawn to it because the folks whose homes were rebuilt were usually facing some sort of personal or financial hardship. But what the show was really selling was the rather insidious message that having more material things is the key to happiness in life.
Case in point is this story from azcentral.com about the aftermath of one Arizona family's appearance on the show:
On Friday night, ABC aired the final episode of "Extreme Makeover: Home Edition," the reality TV show that captivated Valley viewers in 2005, when it transformed a struggling Gilbert family's rented ranch house into a two-story, 5,300-square-foot dream home -- complete with a full-size, electrically powered backyard carousel.
But financial woes spoiled the show's fairy-tale ending, forcing the Okvath family -- Bryan, Nichol and their seven children -- to sell their one-time $1 million mansion for $540,000 in the spring of 2010.
A sad tale of woe, no doubt. So what happened, exactly?
The Gilbert episode began in 2004, when one of the Okvath's daughters, Kassandra, then 8, was undergoing treatment for cancer at the University of Arizona Medical Center in Tucson.She was a fan of the show and wrote to the producers, asking them to rebuild the center's cancer ward.
The producers, touched by her selfless plea, hatched a bigger plan. In addition to renovating the cancer ward, they would tear down the 1,800-square-foot house (with its leaky roof and problem plumbing) that Kassandra's family was renting and rebuild a dream home.
The project generated enormous interest in the Valley. Nearly 4,000 people stood outside the home on a cold and rainy February day to watch the unveiling. The episode aired on March 13, 2005, with the stunned Okvath family reacting with smiles and tears of joy.
And the home's owner, who had okayed the renovation, had signed the property over to the Okvaths, giving the family full ownership.
It seemed like exactly the type of happy ending the show was famous for, but after the cameras left, reality intruded.
Utility bills skyrocketed, reaching $1,200 during the summer months; property taxes increased from $1,625 in 2005 to more than $4,100 in 2006.
Bryan, who was unemployed when the show was filmed, worked sporadically as a truck driver and fire fighter, but none of the jobs paid particularly well. Strapped, the couple used the house as collateral for a $405,000 loan in 2006, but payments on the adjustable-rate mortgage soon became unmanageable.
They tried to sell the house several times -- for $1.9 million in 2007, then for $1.4 million -- but they got no offers.
They narrowly avoided losing the home at a public auction in 2008, then put the house up for sale again. By 2009, the asking price had dropped to $800,000.
In early 2010, it was reported that the Okvaths had been separated for several months and seemed headed for divorce. Efforts to reach them for comment were unsuccessful.
It just goes to show, yet again, that there is no such thing as a free lunch. Yes, it's terrible that little Kassandra Okvath contracted childhood cancer, but quite obviously just handing her family a dream house that they could not afford even if it came with no mortgage was not the answer to their problems. How exactly did anyone connected with this fiasco expect an unemployed truck driver with seven kids to be able to keep up with the expenses of living in a million dollar house?
There is a reason why people like the Okvaths live in shitty houses in the first place: because they either make poor life's decisions, or they are born disadvantaged and don't possess the talent or smarts to rise above their station. I'm not putting them down, just stating the unfortunate fact. What happened in this instance is very reminiscent of lottery winners who end up bankrupt five years later. Some people just cannot handle prosperity. Not to mention the fact that it is also long past time that people stop viewing material possessions as the key to happiness in their lives regardless.
This is a great lessen that ought to be heeded by Spoiled Rotten (Keynesian) economists like Paul Krugman. Just having the government tax the rich and borrow more money from future generations to hand out to people is not going to fix their long term financial predicaments, even if as a nation we could afford it anymore.
It's actually too bad that instead of being cancelled, Extreme Makeover: Home Edition cannot be forced to do a follow up episode on what happened to this unfortunate family as well as any others who appeared on the show who might be in the same predicament. Because I'll just bet the Okvaths aren't the only ones. The aftermath of such fantasy pipe dreams is the real "reality show" that Americans desperately need to see.
Bonus: This short clip from the show is disquieting, and not just because mom falls down
