There is no question that RE is on sale all across the country and that mortgage rates are the lowest they have ever been. The problem still remains that it is so difficult to qualify for a mortgage. Until that loosens up, the market will continue to stay flat or decline. It is a simple supply and demand factor and right now, supply is higher than actual demand (buyers who are already qualified for a loan and looking to buy)
There is no question that RE is on sale all across the country and that mortgage rates are the lowest they have ever been. The problem still remains that it is so difficult to qualify for a mortgage. Until that loosens up, the market will continue to stay flat or decline. It is a simple supply and demand factor and right now, supply is higher than actual demand (buyers who are already qualified for a loan and looking to buy)
Cheryl, I did see the interview. He said if there was a way he could buy millions of single family homes and have a way to manage them he would...he definitely could buy them. Interesting for sure.
He must be making the media rounds. I just read this article on Bloomberg about Buffett. So, is he saying that having your home foreclosed on is a valid business model?
If you do some investigation on the tactical aspects of how Buffett invests, the bulk of his success is based on his ability to bring in tremendously strong middle management -- and by middle management, I don't mean what most people typically think of when they hear the term.
Strong middle management in this sense has the ability to transition fluently from on-the-ground day-to-day tactical work to high-level over-arching business strategy (and everything in-between), and there are very few people in any industry that have the ability to be true middle management for a Buffett or Buffett-like company.
Finding folks who could play the middle management role in company overseeing millions of rentals is probably near impossible, especially given that the bulk of those who are qualified probably don't need the money or the recognition that comes with working for Buffett.
I certainly could be wrong, but that's my take on why he's not actually doing it...at least not yet...
He said something about his company not finding decent solution to manage that many individual single family homes, unlike apartment buildings. I, personally, think he's out there drumming up interest in the bulk sale program the government just announced. Not sure why he would do that, favor to President Obama maybe, but strange that he's saying all those things the same day they announce the first 2500 bulk sales program.
If you do some investigation on the tactical aspects of how Buffett invests, the bulk of his success is based on his ability to bring in tremendously strong middle management -- and by middle management, I don't mean what most people typically think of when they hear the term.
Strong middle management in this sense has the ability to transition fluently from on-the-ground day-to-day tactical work to high-level over-arching business strategy (and everything in-between), and there are very few people in any industry that have the ability to be true middle management for a Buffett or Buffett-like company.
Finding folks who could play the middle management role in company overseeing millions of rentals is probably near impossible, especially given that the bulk of those who are qualified probably don't need the money or the recognition that comes with working for Buffett.
I certainly could be wrong, but that's my take on why he's not actually doing it...at least not yet...
The valuation of bringing in people who know how to evaluate SFR's, be able to manage rehabs (as a result contractors) then manage the property and place tenants on a mass scale would be very tough to do internally. It would be tough even if he did it by leveraging people outside his company and having his company manage the outsiders.
I don't see him not taking on projects because part of the return is the forced appreciation of rehab work in order to get a higher overall appreciation which is what i assume he is talking about when saying SFRs will outperform stocks.
The opportunity cost of all this start up vs what he returns in his stocks isn't worth the spread to him, imo. It would be a massive undertaking to do it at a mass volume, which, for the fixed time that would be involved with getting into the market, it wouldn't make sense at an SFR level.
Lynn,
Maybe he's got a piece of those bulk sale as a passive cash player. I don't think Warren would trash his reputation for political reasons. The man doesn't need to do that. I really don't think he'd play a shill at this stage of his life.
Shack!
Why's he doing it? He owns a very large chunk of Wells Fargo. I looked at banks' balance sheets quite a bit in 2006/7/8. Wells had a ton of negative amortization loans on their books - mostly concentrated in CA. Wachovia's books were worse and it wasn't any mystery as to why they had to be bought by Wells - for all practical purposes, Wachovia was insolvent.
I don't know the current shape of Wells' mortgage holdings. Unless they were able to sell their crap mortgages to the Fed, Wells is a potential ticking time bomb if residential real estate prices continue to slide.
If you look at Wells' business model, they make a large chunk of their profits originating mortgages. How do you get qualified people to step up and start buying real estate? I dunno ... maybe have Buffett announce on CNBC that now's a great time to buy residential real estate?
Buffett looks like he's trying to help put a floor under residential real estate prices. I've followed Case Shiller closely for almost a decade and it keeps moving slowly lower. Not a huge drop like in the last few years; more a long slow death by 1000 cuts. Every market's local and there are some areas of the country that will do well but there are a lot of housing cesspools out there (Las Vegas, Phoenix, Tucson, Orlando come to mind).
Don't get me wrong; I think that there are some areas of the country that are great opportunities to buy and rent out residential real estate. You can probably even make money in some of the worst locations if you have a very long time horizon and intimately know the local rental market.
Shack!
Why's he doing it? He owns a very large chunk of Wells Fargo. I looked at banks' balance sheets quite a bit in 2006/7/8. Wells had a ton of negative amortization loans on their books - mostly concentrated in CA. Wachovia's books were worse and it wasn't any mystery as to why they had to be bought by Wells - for all practical purposes, Wachovia was insolvent.
I don't know the current shape of Wells' mortgage holdings. Unless they were able to sell their crap mortgages to the Fed, Wells is a potential ticking time bomb if residential real estate prices continue to slide.
If you look at Wells' business model, they make a large chunk of their profits originating mortgages. How do you get qualified people to step up and start buying real estate? I dunno ... maybe have Buffett announce on CNBC that now's a great time to buy residential real estate?
Buffett looks like he's trying to help put a floor under residential real estate prices. I've followed Case Shiller closely for almost a decade and it keeps moving slowly lower. Not a huge drop like in the last few years; more a long slow death by 1000 cuts. Every market's local and there are some areas of the country that will do well but there are a lot of housing cesspools out there (Las Vegas, Phoenix, Tucson, Orlando come to mind).
Don't get me wrong; I think that there are some areas of the country that are great opportunities to buy and rent out residential real estate. You can probably even make money in some of the worst locations if you have a very long time horizon and intimately know the local rental market.
While i see what you're saying, i highly doubt he's telling people to buy SFRs in order to pump wells fargo. I realize wells fargo is a large mortgage company, but, to put your word on the line in order for wells to originate a few mortgages, would be dumb and hurt his credibility.
This to me is a conspiracy theory that isn't likely.
I thought that too, but then considered he may have been doing just the opposite because Credit Suisse got to play sole agent for that 2490 unit sale, not Wells.
This to me is a conspiracy theory that isn't likely.
I've watched Buffett for a long time. I've even attended a BRK shareholder meeting. He's a shrewd operator; don't be fooled by his folksy charm. BRK has quite a few companies that it owns that depend on RRE.
I think at this point in his life, Buffett views himself as a modern JP Morgan, who instilled public confidence and played a major role in stopping the Panic of 1907.
This only addresses one problem... the other problem is that no one can move. If you've bought a house in the past 5 to 10 years, chances are you owe more than it's worth. Most people are buying FHA with 3.5% down, a year later, they're under water. How do I move? A short sale? That could disqualify me from buying from 2 to 5 years if I can't prove extenuating circumstances.
Until home prices go up enough to make people mobile again the economy will continue to struggle (can't go where the jobs are because you can't move) and the housing market will struggle (no one is buying, no demand). This problem is WAY more complex then lending standards.
Nathan, I'd have to disagree with the short-term (5yrs) outcome problem of underwater owners. I think their prospects will be better in a few years - at least here in Northen Virginia. The "weak hands" have been washed-out for the most part. Most importantly to those of us here is the rental outlook. The numbers work (not as well as in other regions) better than I have seen since 1997. I've gone after areas that I believe over-corrected. Rents will dictate prices. We have a complete lack of inventory sub 200K and, I believe, only a 3 month supply of total inventory. Rental vacancy is low. I'm pretty much done with rentals. My plate is full. I doing flips now.
Do you really think Buffett is trying to mislead/move the market?
Maybe he's got a piece of those bulk sale as a passive cash player. I don't think Warren would trash his reputation for political reasons. The man doesn't need to do that. I really don't think he'd play a shill at this stage of his life.
Cheryl, I don't think he'd ever play a shill at any stage of his life, but I just find it very coincidental that he chooses today, the day of the announcement of 2500 bulk sales, to express his opinion of, What a great idea if only he had the property management in place to manage it. Fully realize I'm a conspiracy theory nut, but coincidences like that always make me wonder what is really going on in the world.
haha Buffet has become a shill, im sad to say.. he even sent his poor secretary to the state of the union.... if thats not a shill i dont know what is.
i still cant understand, how Buffet, genuinely feels that giving more taxes to the US govt will help anything. The year just started and we are already financing ourselves for at least another year and a half. i really cant see how someone who is so good at managing money can promote this.
Regarding "Wachovia's books were worse and it wasn't any mystery as to why they had to be bought by Wells..." the announced buyout was days after credit markets collapsed, Lehman went bankrupt, and Merill Lynch was acquired by Bank of America. Independently each may have survived (Wells being probably rather than may), but the combination is doing fine. Much better as a combination, IMO. Regarding "If you look at Wells' business model, they make a large chunk of their profits originating mortgages." This really isn't as much the case today. All of their "Mortgage banking" is only 20% of Noninterest income, and their big profit maker is Interest income on loans... the way it should be for a bank, eh? Bank lending and making money. Novel.
Regarding the Buffett story. I can see Buffett buying into a national builder who "steps up" to commit to recycling some (thousands) of the Fannie Mae inventory. Probably not a Toll Brothers' Gibraltar project (invests in distressed real estate opportunities) or Beazer Homes USA Inc.'s Pre-Owned Homes Division (capped at $20M). Some builders are going to get in on it... then it may be interesting.
If you do some investigation on the tactical aspects of how Buffett invests, the bulk of his success is based on his ability to bring in tremendously strong middle management -- and by middle management, I don't mean what most people typically think of when they hear the term.
Strong middle management in this sense has the ability to transition fluently from on-the-ground day-to-day tactical work to high-level over-arching business strategy (and everything in-between), and there are very few people in any industry that have the ability to be true middle management for a Buffett or Buffett-like company.
Finding folks who could play the middle management role in company overseeing millions of rentals is probably near impossible, especially given that the bulk of those who are qualified probably don't need the money or the recognition that comes with working for Buffett.
I certainly could be wrong, but that's my take on why he's not actually doing it...at least not yet...
Hey, how ya been?
Well, have him call me!
I'd suggest he not buy in say, Blue Eye, Mo. or in places where it is difficult to reach out and touch em, I don't see major metropolitian areas being a problem as it's easy to get the door knockers and foot soldiers. With that, going up the food chain gets easier.
I'm also surprised so many folks here watch MSNBC! LOL
Why, yes. He already did trash his reputation.
Fast forward to 10:45
http://www.youtube.com/watch?v=eQYy25kLijA
I (personally) wouldn't trust Buffett at all.
Ok. I guess I'll come out from hiding under the table. I didn't expect the lack of trust with respect to WB. It seems that the consensus is that he is lying in order to gain personally or to help BO. I do not agree with his "tax the rich" propaganda but I had separated that from his business analysis.
Here's something else for a follow up...
http://patdollard.com/2011/11/buffett-helped-draft-bailout-rules-made-massive-profits-in-return/
ANOTHER OUT-OF-TOUCH BILLIONAIRE. Buffett proves 'I'd rather be lucky than smart"
This all makes me want to up-chuck!
I don't understand why some of you think swaying sponsors, influencers, and decision makers is wrong. Business people (and sales people) should be doing this every day.