Zell sees housing recovery this spring

The guy who signs the paychecks around here, Sam Zell, opined on CNBC that he sees a housing turnaround this spring.  From Reuters:   "I think starts have already pretty much bottomed out," Zell said. "I think the housing market this spring will begin its recovery phase."

Forbes: "Many investors are agreeing with Zell's assessment that the bottom is near. They are rushing into homebuilders, which were battered throughout 2007, in anticipation of better times ahead. In the past three months, shares of D.R. Horton, Pulte Homes, and Lennar have each rallied at least 40%."

For the record, even though the big boss is bullish, I continue to believe the housing market in Southern California is a long way from a bottom, and that prices are likely to decline throughout most of 2008.  On a national level, it's quite possible housing starts have bottomed out and will soon begin a recovery.  We could also get a little bounce off the bottom this spring in L.A.-area housing activity, but my guess is that after a brief pop, rising inventory will resume putting downward pressure on prices. 

It's worth noting, though, that Zell has made a ton of money in real estate over the years.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: Sam Zell, from The Chicago Tribune
   

Comments

[TrojanDLA]

I'm surprised. With the impending recession ahead of us, rising energy costs, and stricter lending guidelines, home purchases are not just more difficult but hard to afford. Hmmmm... this is all very hard to believe.

But then he's the real estate billionaire, so what do I know?

[JohnnyB]

Oh, sure... all the data is pointing to an imminent recovery. Including the stats just 2 blogs down.

Please, where do I sign on to start my flipping?

There are obviously HUGE vested interests in turning this mess around ASAP and they continue to try to weave niblets into corn cobs... and they continue to LIE through their teeth, while knowing better.

Expect the normal seasonal, warm weather up-tick data will be latched onto by drowning moguls like the sole remaining life raft to salvation as the Titanic continues to sink.

Guess what... those little life rafts of data will not a Titanic float.

Expect the normal seasonal, warm weather up-tick data will be latched onto by drowning moguls like the sole remaining life raft to salvation as the Titanic continues to sink.

Guess what... those little like rafts of data will not a Titanic float.

[jb]

Great!
Then there is no reason to raise limits on mortgages, no reason for any rescue of banks and FBs, and no reason to keep cutting interest rats to sodomize savers.

Zell pays less % taxes than his secretary. He scams the system like all of the super wealthy. It is time for a change - "the rage is relentless, we need a movement with some quickness" - zdlr

[CD]

I'll tell you what Wells Fargo is saying, every county in California is severely distressed and they will not do mortgages for severely distressed area because they know if you buy now, you will realize very soon that you over paid and you will be sending them back the keys. We are in a free fall, 50% off will not even be enough to reach the real price of some properties. So enjoy the ride down and KEEP YOUR CASH PEOPLE ,you will need it when bread reaches $10 a loaf soon. .As a blogger mentioned on Calculated Risk" Note to myself : invent a
steel locked comfy mattress"

[jaded]

I had no idea Sam Zell is just a leprechaun!

[KenDoMore]

Zell is a shrewd investor who knows his business well... listen to him.

[Max Thrax]

"Obviously what we have going on is an attempt to create a self-fulfilling prophecy," Zell declared. "We have two Democratic candidates who are vying with each other to describe the economic situation worse.

"The reality is that if you live on Wall Street and you're in the credit markets the world couldn't be worse. If you're a farmer and you're getting $25 for your wheat, you're having a great time. If you're a CEO and you've got a balance sheet that's bullet-proof, you're in a great position. This whole thing is way out of control, way out of hand."

Yup, it's the Democrats fault. And we're winning in Iraq. And the biggest threat to this country is the homosexual agenda. No wonder I rarely read the LA Times anymore.

[toby]

Sam Zell is running the LA Times into the ground.

Not only does he sound like a crazy hack when he blamed Obama and Clinton for the RE downturn.

Hey Sam, why don't you stick to what you know best: How to fire LA Times Editors every 2 months.

[Cal]

For inventory to clear we must hit market clearing prices to bring inventory down OR homeowners must pull their homes off the market and live there.

Since I think many homeowners see this as the last chance to "cash out" for a very long time or are in a personal situation which won't allow them to not sell the home then it all turns to the market to clear the homes. Therefore market clearing prices must be hit for volume to increase to a level to reduce inventory.

In short, I hope Zell is right (though I think he is talking more about new homes and residential investment component of the economy rather than resales) because if he is that means prices have come down to the point of incomes supporting their level.

[bottom line]

Old Sam is "whistlin' past the graveyard"' lol. The only difference is THIS time the boogeyman is real, but Sam can't/doesn't want to see.

Funny, that bubble the uber rich live in. Not only are they sooo removed from the "man on the street" reality, but their syncophants are all "yes men/women", telling them the emperor looks great in that new suit!

Like loyal bushies.

[PREFAB SPROUT]

Zell made his money in COMMERCIAL real estate. His views on the housing market are no more valid than mine. One thing is for sure---the more people he guts from the Times the longer it will take for housing to recover-we know THEY won't be buying!!

[alvin]

i said it once. i'll say it again.

housing starts are NOT prices.

housing starts measures the number of new homes being constructed. it has NOTHING to do with prices.
and no where does sam zell say prices in LA (or anywhere else) are bottoming, only housing starts.

good for the home builders. irrelevant for los angeles home prices.

does anyone actually read the articles?

[kat]

Mr. Zell seems to think it's just a time issue or a percentage issue as far as when the housing market (in hot spots like CA) will bottom out. But what it's really about is when prices will fall to a point where they are in reach of the people who are in the middle income majority. Most people who make enough to pay a $4,000 mortgage are not willing to live in a slum. At the same time, middle income people cannot afford the mortgage on a "starter" home they are willing to raise thier family in.

The homes have to get back in the reach of the middle class. That is when the bottom will fall out.

That is why it's important that the federal government not get involved in this mess. The market needs to be purged of the squatters and deadbeats to open up the homes for people who deserve them and can pay for them. When the deadbeats and squatters are run out the market will be flooded and the prices will drop.

[Keith - LetItSink.blogspot.com]

So Zell must be the one who prohibits the LA Times reporters from delivering housing information in a usable form. It probably upsets the advertisers.

For example, since LA is ground zero of the popping bubble, why doesn't this paper have a permanent and complete source of data available for readers? See previous paragraph.

[firesale]

The light at the end of Zell's tunnel is the
freight train headed your way!

Everytime you lose your money in a
market... the top 1% of this country's
wealth seem to gain. Have you
noticed? Why wouldn't he be a
cheerleader for his self-interest?

[CB]

I agree with Zell - this is a great time to buy housing stocks with prices near all time lows (wish I had bought back in January!).

Still a bad time to buy a house though.

Toby - you are an idiot and just another whiny blogger. Tell us your opinion when you've made your first billion in RE (Zell has made 20 times that).

[EconE]

HAHAHAHAHAHAHA.

no...really....

HAHAHAHAHAHAHA!

So...Mr Zell...what percentage of L.A. times advertising revenue comes from RE associated interests? You know...like builders, mortgage lenders, RE brokerages?

Oh...that's right. The majority of it.

I wonder how many condos this Zell guy is trying to flip?

[BIg D]

Of course housing prices will continue to drop. One big reason is because of Peter Viles' continued negative ranting about the So. Cal housing market on the LATimes website (blog). Remember folks, the housing market comes down to consumer confidence and Peter is doing wonders for that!

[vultur]

"Zell made his money in COMMERCIAL real estate. His views on the housing market are no more valid than mine. One thing is for sure---the more people he guts from the Times the longer it will take for housing to recover-we know THEY won't be buying!!

Posted by: PREFAB SPROUT | February 27, 2008 at 12:38 PM"

The disregard shown here for perhaps the most successful real estate investor of our time is disgraceful. To suggest that is opinions are invalid are ridiculous. He is a self-made billionaire (the real kind, not to bafoonish orange haired self-promoter kind) who amassed a fortune starting in college when he rented apartments to classmates all the way through to his $40B sale to Blackstone last Spring. His sale defined the top of the market for this cycle. He was asked his opinion on where the national housing market stands today- not the Southern California market, not the Phoenix market, not the Miami market- the national market. He expressed his opinion which may be a little optimistic but so what? He's not making any guarantees, he's expressing an informed opinion and probably hoping that America prospers and him along with it.

He created the largest apartment REIT (Equity Residential) and the largest office REIT (Equity Office), and now has bought himself a little hobby business for a few hundred mil of his own capital (The LA Times) to keep him occupied.

Give the man some credit you damn bitter bunch! You can learn more with your mouth shut and your eyes open than screaming with your eyes shut!

[At the other beach]

NationalBubble: North Florida has bottomed out. We'll be level for a while, so it's a good time to be aggressive in deals. We're probably two years ahead of LA.

South Florida is still a mess, though.

[MyLessThanPrimeBeef]

It's funny that while famed value investor David Dremen was quoted in Bloomberg 1/30/08 that he wasn't optimistic about bond insurer MBIA, Marty Whitman, another smart value guy who in his last quarterly report said he thought MBIA was oversold.

So, as much as I am sure Zell has made a lot more than Toby, I know you can find other very smart investors who are not touching real estate right now.

Argument by authority, as they say in logic, doesn't really help in this case, just as in all other cases.

[arroyogrande]

"Remember folks, the housing market comes down to consumer confidence and Peter is doing wonders for that!"

And, we you espousing the same attitude when housing prices were skyrocketing, and "the media" was falling over itself to do stories on successful real estate investors and multiple bids on houses?

Just wondering...

Because I'd always been told that the high prices of 2005-2006 were based on *ahem* "fundamentals", such as "everyone wants to live here".

- arroyogrande

[JohnnyB]

Zell said. "I think the housing market this spring will begin its recovery phase."

vultur... “The disregard shown here…”

Many know, bow and kowtow, but come on!

...this spring?

IMPOSSIBLE

MISLEADING

DISINGENUOUS

but, HUMOROUS

[El Guapo]

So Peter Viles is single handedly bringing the market down, Big D?!?! Wow, I'd call him "The Amazing Peter" if that weren't so easily misconstrued.

As for expert opinions, everybody should take a Valium. I believe he is talking about housing stocks and we can all find an expert who fits with our world view. So what's the point in getting riled up here?

[MyLessThanPrimeBeef]

Ahhhh, consumer confidence.

So, Troy felt not because Achilles killed Hector and later, the horse gift trick, but that Trojan confidence was undermined by Cassandra?