The residential sector has bottomed out and the sector will recover within the year, Sam Zell, founder and chairman of Equity Group Investments told CNBC. He also said the impending commercial market fallout will follow the pattern of the broader economy. “You have to look at the big picture,” he said. “If the overall economy recovers, there will be a demand for more high-class office space and high quality retail space,” Zell said. In comparing the residential and commercial markets, he said the problems in the residential sector were greater because they were caused by fraud. “People were creating mortgages, brokers were twisting arms, and we are beginning to see proof of that,” he said.

As the fall of 2009 comes to a close, many of the commercial real estate lenders continue to limit their exposure to financing for real estate. The buzzword for 2009 is “extend and pretend,” whereby a bank extends the term of a loan to a later date. The legendary Samuel Zell, chairman of Equity Group Investments, the keynote speaker at the NYU Capital Markets conference Nov. 19, stated that “our government has become the bailout city. If a loan is kept current, banks will ‘pretend and extend.’” No one is surprised by the “pretend and extend concept,” especially if you had the opportunity to gain insight from the Federal Reserve’s October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices and hear the comments made by Ben Bernanke, chairman of the Federal Reserve, in a speech at the Economic Club of New York Nov. 16. The Fed’s Opinion Survey addresses changes in the supply and demand of loans to businesses and households over the past three months. The results were based upon responses from 57 domestic banks and 23 U.S. branches and agencies of foreign banks. [more]