Interesting Times

"Housing market stability will appear sometime this summer," Zell said, speaking before more than 2,000 people attending a luncheon at the International Council of Shopping Centers' annual convention in Las Vegas. "I can't tell you if it's June 29 or Aug. 1."

The dearth of new supply should help the housing market find a bottom, Zell said. U.S. home builders have been forced to severely scale back on new homes, to an estimated 350,000 this year at current construction rates from 1.7 million in 2006.

Zell made a fortune in commercial real estate by buying up distressed property in the early 1990s during a deep downturn in the U.S. commercial property sector.

In 2007, he personally reaped roughly $2 billion when he sold Equity Office Properties Trust to Blackstone Group for about $23 billion. That sale is seen by many real estate investors as the top of the U.S. commercial real estate boom.

Since then, U.S. commercial real estate prices have fallen about 15 percent to 20 percent and are expected decline by similar amount before bottoming out. The frozen credit markets have made valuing U.S. commercial real estate difficult because the lack of funding for debt financing has resulted in very few sales.

The U.S. recession has taken its toll on the shopping center industry. At the conference, which in the past served as a place where retailers and landlords met to discuss new leases, the talk has been about bringing property owners needing cash together with opportunistic buyers, said Anthony Buono, executive director at CB Richard Ellis Group Inc (CBG.N), the world's largest real estate services company.

U.S. retailers and property owners may get some relief if the housing market leads a recovery by giving U.S. consumers more clarity about the value of their homes, their No. 1 source of wealth.

"That will be very positive for retail sales," Zell said.

Yet those sales are unlikely to mirror the spending boom of a couple of years ago.

"I think the days of extraordinary expenditures without regard to cost to keep up with the Joneses is less likely a case going forward," Zell said. "I envision a slow unclogging of the worldwide financial system, which ultimately will be positive for all of us."

But his recovery scenario could be scuttled by risks such as U.S. tax policy, the escalating U.S. class warfare seen during the rescue of U.S. banks, as well as the bankruptcy of U.S. automaker Chrysler Holding LLC [CCMLPD.UL]. The huge expenditure of U.S. healthcare, as well as anti-globalization sentiment and trade risks could also derail a recovery.

"This is a worldwide recession and not a U.S. recession," said Zell, who has invested in Mexico, South America, Egypt, China and other parts of the world through his private investment firm Equity International.

"But the U.S. will recover and recover first around the world because we have a culture and we have an environment where we face up to reality quickly and effectively as opposed to many other counties in the world which create zombie environments because they are not able to face up to reality," he added.