Worst Over For Housing—Fraud Was Big Cause: Zell
The worst of the residential housing market is over, Equity Group Investment Chairman Sam Zell told CNBC on Wednesday, but fraud was a major cause.
"I think we've seen the bottom in housing and we have passed through the worst issues," Zell said. "There are still some rough spots for sure, like foreclosures but I think we will see a housing recovery through 2010."
Zell, who's private investment firm invests in commercial real estate said that a lot of the problems in the residential home market can be traced to fraud.
"I think it's going to come out that fraud played a major role in housing," said Zell. "It was free money and people were creating mortgages and you had brokers twisting people's arms, you had 'liar's loans'. I don't think there's any surprise here."
Zell also said the commercial real estate market was different than the residential by the fact that commercials' problems are supply and demand—and that the residential market was over expanded. He also said that he saw five years of no new development in commercial real estate and that the non-institutional commercial market will come apart in 2010.
As for emerging markets, Zell said his firm continues to invest in Brazil because it has unique growth opportunities. "Brazil has a great future," Zell said. "We are the biggest investor and home builder there. The country is a great place and does not have massive de-leveraging problems.
And for the bankruptcy of the Tribune Company, which Zell bought in 2007 and turned private, Zell said he expected it to come out of Chapter 11 sometime in the first part of 2010. Tribune owns various radio and TV stations and newspapers including the Los Angeles Times and Chicago Tribune. It also owned the Chicago Cubs major league baseball team but sold it in 2009.
As for the overall economy, Zell said not enough is being done. "It's jobs, jobs, jobs," Zell said. "Anything else is just smoke and mirrors. (President) Obama should focus more on the economy."