Real estate tycoons Sam Zell and Barry Sternlicht, along with hedge fund honcho Bill Ackman, told the audience at Delivering Alpha, a joint Institutional Investor and CNBC conference this week, that the best thing the federal government can do to solve the real estate slump is to stay out of the market entirely.
“If anything, the government should undo what they’ve done so far,” said Zell. “Government is never efficient, which is why they should stay out of the financial markets. They should focus on foreign affairs.”
Starwood’s Sternlicht said the government has been amateurish with its handling of the home mortgage crisis. Although there is a demand for single-family homes, many buyers can’t get approvals for mortgages. “That’s what the government doesn’t get. They have to figure out how to stabilize the housing markets. Housing is the backbone of the country’s confidence,” Sternlicht said.
The one place that Uncle Sam could prove useful is if the government facilitated the single-family housing market by buying homes and leasing them, according to Ackman. “There’s lots of institutional money looking for yield. If the government were to equatize the debt of Fannie and Freddy, you could employ a half million people,” he said.
Ackman said that real estate, despite the sagging market, remains an attractive place to allocate hedge fund assets. “It’s an inflation protected investment with steady, predictable yields,” he said.
Would the real estate market improve if the White House had a new tenant? “I thought Jimmy Carter was bad,” said Zell. “Things can’t get any worse. Anybody but Obama.”
America desperately needs leadership, according to Sternlicht. “We have a former community organizer who’s acting like a community organizer, not a leader,” he said.
