Zell urges "cleansing," not sympathy, on housing

I now understand Sam Zell's strategy to revive newspapers: He's going to provide all the content himself. Here's Zell's analysis of the housing market today, filed by Tom Petruno on his Money & Co. blog:

"What this country needs is a cleansing" in the residential market, Zell said. "We need to clear out all of those people who should never have been in houses in the first place and who for sure shouldn't be getting sympathy." He blamed another Sam -- Uncle in Washington -- for encouraging homeownership at any cost in recent years. The rise in the U.S. homeownership rate from 63% to 69% during the boom was totally unjustified, Zell said, other than by "the political impetus of, 'Let's put more people into homes they can't afford.'"

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo: Charles Rex Arbogast / AP

Comments

[pugtv]

ShockG,

How about giving us some analytical insight into your position on housing as opposed to your usual angry rant? I'd really like to understand where you're coming from.

[Ryan]

Another anybody-but-me comment from a guy that should know better. This is the same guy that bought the Tribune company with very little of his own money. In other words, he put very little down while utilizing creative financing to get the deal done. Isn't this the same buying method that started the current housing crisis in the first place?

[Look, Ma, I'm published]

Since when were enemas so selective?

Something's missing here...hmm, let me see, let me see...Ah Yes! Got it:

"we need to clear out all of those lenders approving loans for borrowers who could not afford the product"

Oh, wait, what I'm I talking about. Personal accountability only applies to the consumer.

[original thinker]

I LIKE THIS MAN !

[save your ammo]

"What this country needs is a cleansing..."
-- Dr. Zell

Bend over Real Estate hype... here comes the nozzle!

[el guapo]

The more big name folks who actually come forward and say that the housing boom was unsustainable and by extension, should be allowed to crash, the better. Kudos to Sam Zell, Warren Buffet, Eli Broad and any others that inject a little sense into the mainstream coverage of this debacle. I would love to see a rising chorus (acceptance?) that this was/ is a Ponzi scheme.

[Uncle Billy]

I urged a thorough cleaning as well earlier in the month on this very blog, but I called it a high colonic (credit to Joker in the Batman movie). "Cleansing" connotes sterility and inhumanity.

Disturbing though how he thinks that we just need to cleanse ourselves of those underserving homebuyers. How bout corrupt politicians and all those mean wealthy people that enrich themselves to the point of driving our country into the dirt, huh?

http://tinyurl.com/4va6q3

Yeah, and, um, why does he choose to make these comments at a conference that glorifies the name of a man that we imprisoned for swindling america for his own enrichment not so many years ago? Doesn't he feel a little dirty just being there?

[el guapo]

I would like to add that when the Option Arm blow up occurs, and $1M homes go on the auction block for a fraction of that, it should change the perception of this mess we're in. Currently, people think in terms of subprime and that these were poor rubes who were taken advantage of (surely this happened in some cases). But when folks making 6 figures have the same fate befall them, it will be hard to spin the story that way. By that time, the election will be over, interest rates may be higher and I think homeowner bail out talk may subside.

[avraam jack]

.
Mr. Zell is half right.
.
His error is not that unqualified people bought houses. His error is that those houses were excessively valued. If the houses were not excessively valued very few people would be losing their houses.
.
There should be a cleansing to get house prices back to reality. Policies should not promote excessive valuations.
.
It is better to lose a house today and buy it back at half price in two years.
.

[Enlightenment]

Who is to blame:
- Federal / State / Local Government. Should have stopped this mess long time ago....need to kick all of you out of office.
- Financial Institutions / Banks / Loan Brokers. Should never have given loans without income verification...idiots idiots idiots!
- Realtors. For lieing to sell a house. For looking the other way when people couldn't afford the house...good job you scum!!! Thanks for all the lies...the prices will always go up...there isn't any more land...blah blah blah...you aren't worth the 6% that you steal from us.
- Home Builders. Stupid enough to build too many homes, and above what the average person can afford.
- House Flippers. There is a special place in hell reserved for you scum.
- Home Purchasers (Home Owners). No one forced you to sign the papers. Your fault to buy a house that you can't afford!!! Thanks for being greedy and stupid. LACK of personal accountability.
- Illegal Immigrants. Yes, for sucking up housing from legal citizens.

We need to flush lots of rules and people in the housing sales and loan industry. Too many middle "men" doing very little except for sucking up money.

We need very strict laws to prevent people from buying homes without proof of income. Should use IRS 1040 statements as the most important thing for proof of income.

[Joseph...The Real Estate Guy]

Good idea!

Does he want a Depression unleashed?

[fire sale]

"It is better to lose a house today and buy it back at half price in two years."

Posted by: avraam jack

NOW, THIS IS THE CORE OF A BIG PROBLEM !

Correction:
LOSE A HOME, TODAY. BUY IT BACK IN MINIMUM SEVEN YEARS AFTER ALL THE RESPONSIBLE
BUYERS HAVE FILLED THEIR PLATES. THE IDIOTS WHO HELPED CREATE THIS MESS NEED
TO PAY FOR IT.

[tew]

The jury is out on whether the grave dancer understands the newspaper business, but he knows real estate.

Regarding the comparison of Zell's leverage to buy Tribune with those paying with little money down, please continue the analogy. If Tribune cash flow can't make debt payments and they can't refi then the creditors are first in line and Zell's equity - his money down / position in Tribune are LAST IN LINE. The secured money is just that and the unsecured debt has on overall interest in the company ahead of equity.

[bottom line]

Uh, is this a picture of Zeke from Cabin Creek?

[Mike]

This guy makes more money in a day than most of us make in months, years or lifetimes. Right, wrong or indifferent I am likely going to listen to the guy.

[Nathan]

Zell's analysis is applicable not only to the housing market but to the current state of the economy as a whole. The reason we have experienced inflated asset values and now inflation in basic consumer goods is because it does not work to keep throwing money and incentives into the economy in attempts to fend off cyclical slowing of the economy.

It is a temporary solution that only delays the inevitable and actually worsens it. In the end, the extra money our government dumps into the world makes all of the money less valuable. In real terms, no one ends up better off.

We do need a cleansing. We cannot escape the fundamentals. Asset values cannot be artificially propped up forever. MOST IMPORTANTLY, A GOOD MARKET ECONOMY NEEDS TO REWARD GOOD ECONOMIC DECISION-MAKING AND PUNISH POOR DECISIONS.

Why don't we spend our money on enrolling foreclosed homeowners into financial literacy and counseling programs? Bailing people out and encouraging the same poor decisions only ensures that events like this will keep repeating themselves.

[RZ]

Even though the way Zell states it sounds heartless, I agree with his underlying point. The more sympathy and help we give to ill-informed and/or unprepared and/or selfish (or just plain stupid) consumers who go out and buy items (whether it's houses, tvs, cars, etc.) they can't afford and in the process inflate prices for everyone else, the more likely they and others are to repeat this bad behavior. Maybe it's time to let a bunch of these people suffer the consequences, and use it as a lesson for everyone and future generations that you should ONLY purchase what you can truly afford.

[MyLessThanPrimeBeef]

Sam's right and I hope he starts dumping his homebuilder stocks and his residential REITs. He caught a nice dead cat bounce there, thus teaching all of us there is a diference between buying a house and buying housing stocks. You see, many wishful thinkers here thought when Sam bought those stocks earlier this year that it was also a good time to buy a house, that that was a bottom, the bottom or whatever...