Speeding up foreclosures would help housing market

(Crain’s) — Sam Zell said speeding up the pace of foreclosures would be the quickest cure for the woeful residential market, even as some experts and housing activists say the federal government should slow down the wave of such lawsuits.

During an interview Thursday with Bloomberg TV, the billionaire investor repeated his prediction that the housing market would bottom out, this time by the end of summer, and then bounce along for six to eight months.

“Well, the inventory is going down,” Mr. Zell said, according to a transcript. “The affordability is going up. The government is making serious efforts to provide financing. And I think it’s slowly working. And the best thing that could happen is if we could accelerate all the foreclosures. Because I think they represent a drag on the market.”

Mr. Zell, who is chairman of Chicago-based Equity Residential, an apartment real estate investment trust, has previously offered uncharacteristically optimistic forecasts about the housing market, only to be disappointed. In February 2008, he said he saw the bottom of the housing market just ahead.

He is the former chairman of Equity Office Properties Trust, which he sold in 2007. In commercial real estate, he predicted that the current dearth of investment activity could continue until 2012.

“Well, there’s been a lot of speculation and a lot of journalists have written about the impending demise of commercial real estate,” he said. “First of all, I think that the fact that interest rates are as low as they are means that even if people are under water in commercial real estate, they still can carry it. And if you’re under water and you can carry it, the last thing you’re going to do is sell it, because you don’t get anything.”

“So therefore, that’s why we have no transactions,” he said. “And I think it’s going to take two or three years before we start seeing that happen.”

On other topics, Mr. Zell said:

• Unemployment, which hit 8.9% in April, is close to peaking.

• The federal stimulus package, which Mr. Zell says is working, is also the biggest risk to the economy because of the huge government debt it creates. “Married into that is the creation of all these massive new programs all at once,” he said.

• Asked about the best values in the housing market, Mr. Zell singled out Mexico and Brazil, where he owns stakes in developers focused on lower-cost housing. “In the U.S., I just think that the single-family market is slowly working its way through the morass,” he said.