After posting three straight months of positive data, the residential real estate market has reached an equilibrium where prices will stop falling, said Sam Zell, founder and chairman of Equity Group Investments. This, in turn, will spark stabilization throughout the rest of the economy.
"The key to everything is single-family housing because that's where consumption comes from," Zell said. "If people don't have confidence in their biggest asset, they won't have the confidence to spend."
While this equilibrium most likely won't spread to cities like Miami, where there is excessive overbuilding and subprime foreclosures, most markets will see stabilization this fall.
Commercial real estate, however, hasn't reached its bottom yet, Zell said. Low interest rates have thus far made it possible for people to carry commercial mortgages, but they won't be able to cover two to three years down the line.
"The commercial real estate sector is definitely under water," he said.
Because consumer confidence is key to the economy bouncing back, programs being tossed around Washington that would increase taxes would only further hinder a recovery, Zell said.
"A lot of these wonderful, massive programs that they're currently considering are interesting, and maybe at the top of the marekt we could afford to do them," he said. "To do them at this stage of the game I think is very scary."
Zell recommends investing in overseas real estate markets. He's most confident about Brazil, which is energy and commodity self-sufficient, and China.