A bottom in housing? That's a big 'No' at this confab
I'm at the annual Milken Institute global conference today in Beverly Hills, where 3,000 people from around the planet get together to hear 130 panel discussions on the big issues of the day.
Naturally, you couldn't have a meeting like this without the U.S. housing crisis being at the top of the list of hot topics. So what follows are some of the highlights from a packed morning session entitled "Real Estate: Where Is the Bottom?" (The short answer: not here.)
Brian Fabbri, chief economist for North America at global investment bank BNP Paribas: He sees no chance that home prices will bottom anytime soon, given the glut of supply on the market. Despite that glut, "Builders are still building more homes for sale than people are buying today." As for hopes that mortgage delinquencies might peak soon, "We're going through a recession. In every recession we lose 1.5 to 2 million jobs. We'll lose most of those jobs through the second half of this year." So the math doesn't add up at all for a respite from mortgage-loan defaults, he figures.
Sam Zell, real estate investment legend and now the head of Tribune Co., the L.A. Times' parent: "What this country needs is a cleansing" in the residential market. "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. ' "
Bobby Turner, managing partner of investment firm Canyon Capital Advisors: He and Canyon are big fans of urban real estate in cities with growing immigrant populations (Canyon has partnered up with Earvin "Magic" Johnson in urban development). But the real estate market in general, he suggested, has too many buyers hovering, thinking it's time to grab bargains. "I think you've got this universe of investors that really don't understand the nuances of real estate." Although Canyon has capital to invest, Turner said, he's content "to sit on the sidelines awhile and let people make mistakes."
Posted April 28, 2008