http://nalert.blogspot.com/2012/08/why-buffett-is-betting-big-on-housing.html
Why Buffett Is Betting Big on Housing
By Steve B Follow Sun, 5 Aug 2012, 3:39am 4,640 views 39 comments
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Any report which would mention low inventory, but completely leave out shadow inventory is pure propaganda.
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47 male
Lafayette, CA
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Inventory is easily measured. Shadow inventory estimates are full of bullshit. The last one I saw included people 60 days late. When y'all figure out how to measure the actual shadow inventory instead of making it up, maybe it would be mentioned.
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iwog says
I don't believe they gave any explicit numbers for the "low inventory". But we do know that people are allowed to squat much longer now. For example, in New York, time to foreclosure was always in the 200 days range. Now it's over 1000. We also know that the number of foreclosure sales has gone down, and the number of delinquencies remains elevated. Putting 2+2 together, the shadow inventory must be growing. Last year, the CRL report estimated that the foreclosure crises is only halfway, through, but, because of all the robosigning delays, this year, the ultimate recovery has been kicked even farther down the road.
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Prices are rising, pulling underwater homes closer to the surface, reducing 'at risk' borrowers, lessening the shadow. Heloc maturing to include principal will create another smaller wave going forward. Gray zone for next 3 years.
A property I bought is now worth 30 % more than what I paid for it in May. Supply demand and shit low prices (ca excluded)
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KILLERJANE says
But it doesn't help those borrowers who were delinquent 90 days or more last year and are still over 400 days delinquent this year, because bank didn't foreclose on them. There were over 6 million of them last year. They are still in the pipeline with no light at the end of the tunnel.
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Short sale are bigger this year so far.
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If you know your market is way down, but not sure it's bottom, prices will rise, eventually. But next 4 years bumpy.
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Say hello to your new landlord, Mr. Hedgy.
why should the individual get the cheap house when Fannie can offload a bunch at a time to the big boys without all the individual trans costs. score one for the corps, again.
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Not a long time ago, Buffet was betting Big on GE recovery. Happens he was “Deadly Wrong”
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San Leandro, CA
Buffet has never been bearish on housing
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How much does buffet have invested in interests that would benefit from a housing recovery???
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WHat would be the purpose of him telling everyone what he is betting on?
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Because
He
Is
An
Alzheimers
Victim
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REpro says
That's not correct. If I recall correctly, Buffett bought GE preferred shares under the agreement that GE would pay him 10% in dividend per year, and he had the option of converting those shares to common shares at $20/share.
In another words, Buffett would make 10% dividend annually on the money he loaned to GE regardless. He would only exercise his option if GE's stock is north of $20. GE didn't go BK, and he's making 10% yield annually. Not sure where he was "Deadly Wrong."
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dunnross says
LOL! Gotta love the fact that people just keep posting guesstimated numbers & call them a fact. Got the data to back your number by any chance dunross, or was this number from some bear economist?
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E-man says
Yes, and he is probably buying that real estate at 1975 prices, already.
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It's quite simple.
Buffet understands there are still massive margins at current inflated asking prices.
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Madison, WI
With so many investors, more and more houses will be shabbily maintained, sounds like more Detroit's coming our way.
Housing has become so collateralized that it's always going to be a problem.
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everything says
Yes. For years to come...
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E-man says
Buffett with his capital was able to negotiate with hedge. His followers weren’t that lucky.
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REpro says
To say that Buffett was "Dead Wrong" with his GE bet is just not correct. You're comparing apples to ranges here. He did not advocate buying GE at all. Even if GE went belly up, he would get all of his money back. That's totally a different bet that he made.
Buffett called for the housing market to hit bottom either by the end of 2010 or 2011. I'm not sure which. So far he's been correct in making this call.
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Aptos, CA
I have seen a few articles stating that Buffett is betting on real estate but nothing backing up that claim. Does anyone know what he is doing? I believe he bought into a manufactured housing company, but that was some time ago.
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If you really think Buffet is so grand then your best bet would be to invest in a couple of shares of BRK. The conditions he gets when "betting" on anything the small investor will never ever get even close to. Doesn't really matter what he is "betting on".
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Brooklyn, NY
b/c he'll be dead soon and as a final good gesture he just wants to move the market in that direction so that sheep will follow. he doesnt care how much he loses.
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E-man says
Yes, in fact I do. Actually, this year it's closer to 9.8M. Here is a link of someone who has taken time to analyze the data. If you have any issues with this analysis, please speak up:
http://www.nakedcapitalism.com/2012/01/michael-olenick-10-million-shadow-inventory-says-housing-market-is-a-long-way-from-the-bottom.html
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Madison, WI
You sold it for 30% more than you paid just months ago?, did you add any value?, that's some major inflation wherever that property is.. Are you into flipping?, because 30% over a few months time is a dream for most investors.
KILLERJANE says
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He already invested big into the housing market, he bought a lot of construction companies. (He isn't buying SFR's in SF Bay area to flip, so please don't misunderstand).
Now he is advertising it to make profit... duh! If I owned a ton of construction companies I'd do the same. He'll make money either way, construction costs are and always been far below the resale value.
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everything says
He means he sold it for 30% less than he paid just months ago.
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When Buffett or Goldman comes out bullish, it means they already have a position, and most likely want to sell it to you at a higher price.
Buffett has been fully invested in housing all the way through the crash. He depends on homeowners to buy his insurance. To shop at his stores. Almost every business he has depends on a healthy real estate market.... As for personal investment, I believe Buffett owns only one home and has lived there for decades. What does that tell you about his opinion on a "home" being a sound "investment"?
Buffett has been wrong numerous times. He bought many shares going into the crash of 2008 and at points were down a good 50%. Lucky for him, he has a flock of worshipers that he can convince to buy in when he announces his position. I have no respect for him. Another connected son of a congressman....
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dunnross says
Are you freaking kidding me? The author ASSume this number and ASSume that number. His numbers are more accurate than Corelogic and the Census? He said the Census spent $13B to compile the data, and his data is more accurate? How much did he spend? Talking about wishful thinking. Basically, people have no freaking clue about what the true "shadow inventory" is.
Come on, you can do better than that.
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Buffet claims to be betting big on housing for a couple reasons
One, the guy LOVES the idea of circumventing capitalistic activity (risk) for free money, he can't resist the sweet monopolistic, rent-seeking honey pot
That and, he would really like to see his WFC bets realize some profits. He had been mark-to-fantasizing on his WFC holdings (the buffet rules) claiming that the stock had been undervalued, and dontcha know, here we are at all time highs. Hell, WFC is up over 50% in the last 12 months. Must be nice to be so close to the free gov money spigot
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Warren Buffett called the US Secretary of the Treasury at 3am waking him out of bed. Hank not knowing who the heck was calling him was at first thinking it was his mother's butler named "Warren" but then realizing it was the richest man in America on the phone begging and crying for a bailout. The next day the bailouts begin so you know this country has been taken over by rich elitist crooks! As far as shadow inventory it must include all the homes in my area that have been playing "Musical For Sale" signs the last 5 years. One goes up, one comes down. Another sign comes down while another goes up. Then that one gets taken down after 6 months and the one you always thought was empty a sign goes up confirming your suspicions. The few homes that actually sold now have "For Rent" signs on them. The housing market is never coming back!
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Fort Lauderdale, FL
"The momentum effect." What a load of crap! They're name dropping but don't even say in what way Buffet is "betting big in housing." The little weasel says inventory is down and prices are up but fails to mention why. The other reporter throws in a couple of lines to make is look balanced. This report is reprehesible. Classic propaganda.
However that sort of propaganda fueled the last bubble for quite some time. All we need is easy credit and we WOULD be off to the races.
I wish I could find a way to feel good about making money off people's stupidity like these people. How does one do it? How do they live with themselves?
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Fort Lauderdale, FL
KILLERJANE says
The problem is when people come out from being underwater they will be putting their houses back on the market increasing inventory and lowering prices.
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Fort Lauderdale, FL
KILLERJANE says
If only supply wasn't low because of underwater home owners and shadow inventory. If only demand wasn't high because of scarcity and herd mentality. If only the "shit low" prices were in line with historic appreciation rates.
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ELC says
Buffett in my opinion is a CLOWN.
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everything says
There is a big difference between believing something's worth 30% more and selling it for 30% more. It's the common man's version of extend and pretend.
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robertoaribas's website
ELC says
you are of course partially wrong... If someone owes 100k, and currently their home is worth 90K, they can't sell... when the value goes up $110K, they can list it. BUT your contention that they can cause prices to drop in ridiculous, they cannot lower their price. So, they can stop prices from rising, but not cause them to fall...
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Fort Lauderdale, FL
robertoaribas says
I see your point but more inventory will end bidding wars. That's what been artificially boosting prices.