by Calculated Risk on 7/28/2009 05:43:00 PM

To preface this post, here are my notes from the April 2008 Milken conference:

Sam Zell started by saying we need to separate commercial from residential. Commercial will be fine in his view (not my view). Also Zell thinks losses are overstated for investment banks and CDOs.

Zell isn't talking about new construction (CRE), rather he is talking about prices for existing CRE. He feels there is too much global demand ("liquidity") for prices to fall too far - especially for Class-A buildings.

A little over a year later several Class-A owners are just walking away.

Now today, from CNBC: Real Estate Bottom Will Turn Around Economy: Zell

After posting three straight months of positive data, the residential real estate market has reached an equilibrium where prices will stop falling, said Sam Zell, founder and chairman of Equity Group Investments. This, in turn, will spark stabilization throughout the rest of the economy.

If single family housing starts and new home sales have found a bottom, then that will remove a key drag from the economy and employment. That is a positive. But I think Zell is wrong on house prices. I think the pace of declines will slow, but that there will be a long tail for real prices.

I could be wrong ... and I think different areas will bottom at different times, and some lower priced areas with heavy foreclosure activity might be at or near a bottom (same with some non-bubble areas). But in general, I think prices will fall further.