Mort Zuckerman: "Home Prices Will Decline For Years"

Tyler Durden's picture

One can not blame Mort Zuckerman for being bullish on housing (or at least some segments thereof): after all the outspoken Obama critic just splurged $930 million on the John Hancock building (which recently went into foreclosure at a $660 million valuation, but Mort has a story about how improvements in the parking lot and somesuch are worth the 50% hike in price). Yet what the Boston Properties chairman likes in commercial real estate (and for a contrarian and somewhat more lucid view feel free to peruse comparable thoughts by Howard Davidowitz) he loathes in residential real estate, which would be bad news for Bank of America if the bank's real name wasn't Bank of Banana Republic. In an interview with CNBC's finest, the USNews editor said that the record shadow inventory is "what’s going to put downward pressure on residential prices. And in my judgment, that’s going to continue forat’s going to continue for several years. We’ve seen home prices go down now for four months in a row, according to the Case-Shiller Index , by 1.3 percent in the last month. So it’s an accelerating downtrend in those prices. This is on top of three to four years of declines.” Oddly enough, no mention of the fact previously discussed by Davidowitz that "we have 21 square feet of selling space for every man woman and child in this country" but then again that may not be too bullish for CRE. And at the end of the day everyone has an agenda.

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hedgeless_horseman's picture

In regards to residential inventory, at least we built attractive and enduring designs with quality construction in sustainable locations that will not dramatically depreciate as they sit empty.  Or else we'd be screwed.


Haywood Jablowme's picture

In regards to residential inventory, at least we built attractive and enduring designs with quality construction in sustainable locations that will not dramatically depreciate as they sit empty.  Or else we'd be screwed.


"quality" construction.......yeah, that's a good one.  You mean the kind of "quality" construction done by outfits who are comprised of 80% illegal immigrants whose bosses decided to chase even more profits by using the shit drywall made from China only to be replaced by dooped homeowners a couple years later? 

The USSA baby - Where "quality" is job #1!


outamyeffinway's picture

Some people take all this too seriously! lol

glenlloyd's picture

Yes, it's all such a pretty shade of....beige, and when your neighbors house burns the siding on yours melts too. And when people want to break in to your house all they need is a serrated knife, because they can just cut their way in.

The worst is perhaps the wide garage door mouth that's front and center, and in some cases there are several garage doors, and along with that is the pretty sight of an overstuffed garage with junk whenever the door is opened.

blindfaith's picture

a very well known and respected architect and builder in Charleston SC told me that the more the house is a stage front, the more people seem to like and buy them.  Quality, who needs any stinking quality when the front of your General Electric Refrigerator that is 3 years old is a total rusty mess, and your Jenn Air Range is a piece of shit.  Jobe secutiry is building crap so it need to be replaced ASAP, that is how we will jump start the new world.

bankonzhongguo's picture

 I would just make a paranoid observation about housing for 2011.  I think the macro model may be to drive people out of home ownership and thus become a nation of renters.  Sure, the economy used to predicated on home construction/ownership, but many banks have seen that it is more profitable to rent property than to issue a mortgage and/or hold it on the books.  I know its more complicated than that, but there have already been numerous bubbles of news of repealing the mortgage interest tax deduction and now that Jerry Brown is back in California they are already talking about killing Prop 13.  Between possible higher prop taxes ("save our schools!"), future higher interest rates and well if Congress nukes the mortgage interest ("austerity" and "temporary emergency debt reduction") , well aside from the safety of "owning your home" why wouldn't TPTB want to revert to a peasant-landlord economy. If industry is not in the cards, well its a whole lot of burger flipping Facebook proletariat.  If the shadow inventory does not reduce and traditional mortgage rates rise with the 30 year, the incomes in a 20% unemployed country cannot support the emerging overhead of home ownership.  If the second dip had some teeth and prices dropped another 20% for two years you would have a chance to recover the status quo, but the Fed and OCC have let those banks hold those OREO for years.  Rent pays better than bonds.  Just pay attention.  Once you leave your home to rent because its cheaper, you may never be able to buy another home.  If you buy something, makes sure it can produce some income.

Snidley Whipsnae's picture

Interesting observations.

Accounting rules changes plays into your scenario. By allowing the banks to hold REO on books at high valuations it is in the banks interest to rent out properties and recover their losses with rent.

Of course, this is all predicated on return on rents being equal to or better than home ownership costs. Congress could shift the focus of residential ownership from individuals to banks with some changes in tax breaks from individuals to banks.

With ownership costs rising with the ten year, more people will be priced out of ownership.

If banks are going to own and rent out large blocks of residential real estate a large market may develop for residential management and they would be hiring or sub contracting large numbers of 'maintanence workers' to keep the banks properties in rentable condition.

If this develops hiring in property management/property maintainence (employment) might catch an uptick.

This is no crazier than leasing autos...which when it first began was seen as a rediculous fact, to me it still appears rediculous.

All speculative, of course.

dizzyfingers's picture

I've been wondering if it's true that the banks don't want to unload because their bottom lines would be busted or if something else could be the reason. With fewer people able to buy, congress probably wouldn't have a problem killing the mortgage tax deduction or changing it so it's only for new owners for a limited time period. Landlords would be in charge. Emphasis on "Lords".

dizzyfingers's picture

Is it too crazy to think that money could be made from those pits somehow...?

Glasgow Gary's picture

As usual, no news here. Just the news that it's allowed to be said, on TV.


jtmo3's picture

But the stock markets gone up 165% in the last week, so who gives a fck about home prices? Party on. Don't you have that great feeling that usually follows a healthy shit?

Flapjackmaka's picture

+90 today on dow. More POMOs and it will reach 12500 by the end of the month. not a good sign

Boilermaker's picture

...and financials and REITs?  You have to plug the most gaping holes first.

velobabe's picture

boston proper really does need 2000 more parking spaces. i think parking lots are the new

the rookie cynic's picture

No recovery in housing or jobs = no recovery. (Except for Wall Street, they'll be just fine. The Fed is on there side after all.)

bronzie's picture

according to Martin Armstrong's cycle work the current real estate downtrend will end in 2032 so only 21 more years of declining home prices left ...

dizzyfingers's picture

....bbbbbbut I may need to sell my house in order to move to a nursing home before that... waaaaaaahhhhhhhhhhh!

Problem Is's picture

US News & World Report is Dinosaur Corporate DickWeed Media
The sooner the worthless government welfare whore teat sucking Z-Suckerman eats shit and goes bankrupt...

The better for the Amerikan Public...

ZH et al have proven these corporate rags as worthless fabrication generators...

A little less A-hole Wall Street propaganda a foot...

Freddie's picture

Zuckerman is a POS and former friend of Obama.  He loved him and now he said he made a mistake voting for him. Zuckerman is a whore, friend of the Fed bankers.

Pants McPants's picture

Play the ball, not the man.  Does the fact that he loved Obama (as you say) diminish anything he says in the interview?

tamboo's picture

at least this parasite is aptly named,
wonder if he lives up to it when he hits the gay sex clubs with his fellow yid the kenyan.

Whore_of_Babylon's picture

I've never met anyone whose obsession with someone's sexual proclivities (implied or imagined) to be anyone who hasn't some serious unmet sexual desires.


buzzsaw99's picture

Prognostications from Madoff's best friend. Whatever.

gloomboomdoom's picture

I have gotten DEATH THREATS on the phone for speaking my mind on Facebook.

People don't like being wrong on forecasting (They try and hide it)... or else they delete you.

Selling the latest scam to granny. Soon we will rip all the old people from their homes and force them to do manual labor to pay back the TARP money.

Ever seen Happy Gilmore?

buzzsaw99's picture

The scene with bob barker was da bomb.

The price is wrong bitch(ez)!

gloomboomdoom's picture

Did Drew Carey get booted? Sorta like Conan? I am too lazy to google that information

dizzyfingers's picture

Some won't know which ones 'til too late...are likely to be packing a 44 mag and a shotgun. Be careful....

Flapjackmaka's picture

What's everyone's thoughts on where the dow will end up at the end of 2011?


Home prices drop 12%? More Americans on welfare? yay

+120... -stocks

plocequ1's picture

Im confused. Does Apple and Google build houses? If not, Rally on.

flattrader's picture

and Facebook is worth 50 bn.  Equal to Boeing.  At least the Squid thinks so.

And it makes what exactly?

traderjoe's picture

All of these purchases - trophy buildings, so-considered trophy companies - imho are done with other people's money and allow these buyers to use these valuations to 'mark' the other parts of their portfolio to some ridiculous level. So, Morty buys a building up 50% from trough - and then gets to claim the rest of the BXP (and his own) portfolio is up 50% from bottom. Shazam! Bonuses for all of management! 

pitz's picture

Yup.  And the opposite is done with the stock of productive companies.  Its bizarre watching, for instance, Barrick Gold, lag the GLD ETF by over 50%, in the past 2 years. 

Same is done with the salaries of producers such as engineers.  Top talent, when they apply to jobs in the US, has to 'compete' with barely literate people who are called 'engineers', and are asked to take salaries comparable to the barely literates. 


dizzyfingers's picture

Atomic spitballs for him. Ready, aim, chew, fire...

I am a Man I am Forty's picture

no doubt, and has everyone forgotten about fannie and freddie, the ultimate get out of jail for free dumpster for mortgages??  geez, who gives a shit if you can stop paying your mortgage and the bank can just toss it over to the good ole taxpayer via fannie and freddie, party on....

dizzyfingers's picture

I began reading Robert Pozen's book Too Big To Save, his idea of 'how to fix the u.s. financial system' involves keeping the swindle going ('cause there's too much money to walk away from) but with tight regulation. I puked on the book. Didn't we believe we HAD regulation? Aren't we paying government parasites to do such jobs?

Instant Karma's picture

I didn't know John Hancock sold his building to Mort. That's my favorite building in Chicago. Great observation deck. Next to Water Tower. Right on Michigan Ave.

Instant Karma's picture

I'm confused. I just watched the video and the John Hancock building is in Boston? Must be two of them.

Dixie Normous's picture

That's it! There's your bottom!

lsbumblebee's picture

It's good to hear a wealthy white man's opinion for a change. Thanks CNBC.

Quigs's picture

Does that John Hancock purchase smell like one of those deals William Black talks about?  +50% in good will value seems a bit steep.

Boilermaker's picture

REITs double the broader market gains today, as usual.  RMZ and IYR go fucking ballistic!



High Plains Drifter's picture

Maybe Morty and some of his pals want to scarf up on some cheap housing for some reason , at pennies on the dollar.........

NotApplicable's picture

What everyone seems to be forgetting is that one man's housing glut is another's political opportunity.

Fedgov will likely eliminate all affordable housing in the name of eradicating urban blight. After all, if there are millions of empty houses owned by Freddie/Fannie et al., why not "Do something!" productive with them.

As I've said here before, Dodd's "Livable Communities Act of 2009" paves the way for a complete takeover of the residential real-estate market. It contains everything needed from rezoning (aka override existing local laws in order to make homogenous regions) to mortgage funding/processing. Then there is the huge new bureaucracy needed, so it ends up creating "jobs" too!

RmcAZ's picture

"...why not "Do something!" productive with them"

Obama should just order that any home that is underwater should be bulldozed, and then give out money for everyone to buy new homes. This is a unique and revolutionary idea that has never been tried before...

... oh, wait.