Sam Zell: Bottom Is Here on US Housing

Real estate legend Sam Zell says the economy and the residential real estate market have seen their worst.

The government’s massive fiscal and monetary stimulus is having a beneficial effect, he tells Bloomberg TV.

“There is no question it will have a positive impact on the economy,” Zell says.

“More importantly, it has had a positive impact on confidence levels. And confidence levels are extraordinarily important in terms of extracting ourselves from this recession.”

As for residential real estate, “the supply-and-demand scenario and the creation of new households are leading to a bottoming out of the single-family market,” Zell says.

“I think this summer we will begin to see equilibrium, bringing costs of housing down to the point where they are very attractive.”

At the same time, he says, “we will have absorbed an enormous amount of foreclosed inventory.”

Discussing commercial real estate, Zell says, “it has a lot higher debt component, and it’s ultimately all about transactions.”

But, since July 2007, there have been few transactions, he points out.

“I think you’ll see a lot of change of ownership in commercial real estate as a result of overly optimistic forecasts that created the debt,” says Zell, who was once the biggest commercial real estate owner in the United States.

“Banks will either foreclose or come up with restructurings that will ultimately allow properties to trade.”

Donald Trump, too, also maintains that real estate has hit bottom.

The flamboyant New York developer recently told Associated Press, “I think real estate is a great investment right now.

Source: Morningnews.com April 2009