When Buffett Speaks... Listen.
From CNN/Money:
Buffett: Real estate slowdown ahead
The Oracle of Omaha expects the housing market to see "significant downward adjustments," and warns on mortgage financing.
On the real estate bubble
Buffett: "What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets. [Buffett singled out Dade and Broward counties in Florida as an area that has experienced a rise in unsold inventory and a stagnation in price.] The day traders of the Internet moved into trading condos, and that kind a speculation can produce a market that can move in a big way. You can get real discontinuities. We've had a real bubble to some degree. I would be surprised if there aren't some significant downward adjustments, especially in the higher end of the housing market."
On mortgage financing
Munger: "There is a lot of ridiculous credit being extended in the U.S. housing sector."
Buffett: "Dumb lending always has its consequences. It's like a disease that doesn't manifest itself for a few weeks, like an epidemic that doesn't show up until it's too late to stop it Any developer will build anything he can borrow against. If you look at the 10Ks that are getting filed [by banks] and compare them just against last year's 10Ks, and look at their balances of 'interest accrued but not paid,' you'll see some very interesting statistics [implying that many homeowners are no longer able to service their current debt]."
Buffett: Real estate slowdown ahead
The Oracle of Omaha expects the housing market to see "significant downward adjustments," and warns on mortgage financing.
On the real estate bubble
Buffett: "What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets. [Buffett singled out Dade and Broward counties in Florida as an area that has experienced a rise in unsold inventory and a stagnation in price.] The day traders of the Internet moved into trading condos, and that kind a speculation can produce a market that can move in a big way. You can get real discontinuities. We've had a real bubble to some degree. I would be surprised if there aren't some significant downward adjustments, especially in the higher end of the housing market."
On mortgage financing
Munger: "There is a lot of ridiculous credit being extended in the U.S. housing sector."
Buffett: "Dumb lending always has its consequences. It's like a disease that doesn't manifest itself for a few weeks, like an epidemic that doesn't show up until it's too late to stop it Any developer will build anything he can borrow against. If you look at the 10Ks that are getting filed [by banks] and compare them just against last year's 10Ks, and look at their balances of 'interest accrued but not paid,' you'll see some very interesting statistics [implying that many homeowners are no longer able to service their current debt]."
22 Comments:
You always steal my thunder :p
Also - the Oracle has and continues to make large bets against the USD.
Yo' RE My Man:
Lighten up a little please. You got to play it straight down the middle. For every Soros, there are the people that invest in the Carlyle Group. End of discussion.
If you hook right and slice left too much around here, you don't end up in the fairway, just the rough and weeds. You don't want Lyme disease or West Nile do you?
Reinvest sounds like aguy stuck in a recent purchase he/she can't dump! I am so happy to see the "investor" or
speculators in hot water.
Reinvestor101,
"He's a liberal market manipulator; and people have the nerve to hate me because I encourage people to wisely invest in real estate, but fall all over themselves hanging on every word Buffet says."
As opposed to hanging off every word you say??
"The man is betting against the USD. That ought to tell you volumes about him and his values."
No, just his economics!
"I wouldn't want to have to rely on him in a foxhole; he'd be shooting all the Americans rather than the enemy."
It speaks volumes about your character suggesting that he is unpatriotic because he calls an economic spade, a spade.
Buffett is a shark for sure. I remember seeing a tape of him speaking to the students at UNC Kenan Flagler Business School which was made available via PBS; the long and the short of it, he was bragging how over x period to y period he made a killing in tobacco stocks (cigarette makers), he added the best part is the product is addicting, so their customers were likely to stay there customers. On the original tape I ordered, those comments were there, I loaned it to a friend and after a # of years re-ordered the VHS, guess what? for the later version that part was edited out. These day's he is trying to cultivate a teddy bear image/legacy and in line with that I believe regarding Real Estate he knows the Sh&^ is hitting the fan and the info is an easy freebie to give the masses at this point. ps: he bought the largest maker of trailers for trailer park's in the USA a few years back...that speaks volumes about his view of how the boomers are going to retire and what Americans will need in the future. Care to pay $3m for a house with a no money down loan? Oh you already own a house, then how about gettin at some of that debt...sorry I meant equity, equity :)
See current state of real estate market in Westchester New York:
http://westchesterny.blogspot.com
More Warren Buffet on Housing ..
http://mba.tuck.dartmouth.edu/
pages/clubs/investment/
WarrenBuffett.html
On housing, let's pretend that Omaha passed a law saying that nobody could move in or out, that the birthrate exactly equaled the deathrate, and the only new housing construction allowed was to replace damaged or destroyed buildings. In other words, a completely stable real estate supply and demand. Now let's say that, in order to increase wealth, someone came up with the idea that at the end of every year, everyone would simply sell the deed of his or her house to a neighbor, and every year the town would increase the price of every house by 20%. Residents could borrow money from outside of town to finance the transactions, and the increased paper wealth allowed them import more luxury goods from outside of Nebraska. As you can tell, no real value has been created in the Omaha economy.
REinvestor,
What is so different about betting against currencies, and betting on real estate? Why is one "better" than the other?
Oh, wait, I know! It is because YOU "invest" in real estate while Soros "manipulates" currencies. Yeah, sure.
The biggest manipulators in currencies are central govts. You had better be good if you want to play against them.
You dislike Soros for the fact he made billions betting against the Bank of England, or the Thai Bhat?
If so, you are a hypocrite.
Soros made his mony by betting against govt. and fiat currency. He took money from the greedy bankers, and govt officials. I lose no sleep over it.
I think Soros has foolish political views. That takes nothing away from the fact he has a brilliant mind for finance and speculation.
If you are going to bother posting, see if you can stick to facts, or opinions supported by facts. Quit it with the stupid political diatribes.
Guys, reinvestor101 is a troll. Don't feed
Can't talk about Soros without talking about how his theory of Reflexivity applies to the housing market..
REINVESTOR101 said...
"They're different like lions and tigers being different. Both are still in the big cat family. Both of them hate our president and both have liberal tendencies."
Strange analogy? As for the prez, 2/3 of the US think he's doing a bad job, so I guess these guys have some good company. You make it sound treasonous to dislike the prez. As for being liberal, well since when has that been a crime?
Ba ba ba ba ba ba BOYCOTT Overpriced Houses!
Just say NO MAAS!
Boooooyaaaaaaaa
Bob
"I noticed that while you call for facts, your post is bereft of major facts about Soros. How about the fact that Soros attempted to influence elections here by campaigning against Bush?"
Look, John Kerry turns my stomach, and my preference was for Bush.
Soros is a fool in his politics--so what? What does that prove? It is against the law to vote against GWB?
"How about the fact that he's trying to liberalize drug laws here and in other countries."
The govt. has no business telling people what they should put into their bodies. Our drug laws are crimes against humanity, and should be repealed. I only hope the govt. stops the stupid persecution of people who take unpopular drugs.
I say this as a "right-winged libertarian, who is probably to the right of Barry Goldwater.
But this has nothing to do with real estate, so I'll end my rant here.
Bottomline: you are using the shotgun approach to smear the credibility of someone who has a message you don't want to hear.
"Do you realize that al qaeda funds themselves with drug money? Half of the left wing regimes in south and central America that hate us fund themselves with drug money. Do you want people like Hugo Chavez to sell us both drugs and oil? "
You really are a fool who can't string two thoughts together. Maybe you are smoking something.
You believe everything you are told to by the fascists in the Republican party who think anyone who is opposed to the stupid drug war is "a leftist."
The drug trade is so profitable and violent because of prohibition. Didn't our very own CIA profit from the drug war back in the 80's?
Allow drug producers to produce and settle disputes like regular business, and watch profits come down to normal levels.
Considering the ease of production, it wouldn't surprise me if the buisness became unprofitable, like many other agricultural businesses.
Our "war on drugs" is a war on people. Why else would we have millions of people locked up for nothing other than possession of a drug? What do they have to do with "terrorism", "national security", and the like? We've been locking up people long before Al Qaida was a problem.
Prohibition makes OUR govt. more oppressive. You could lose your home simply by RENTING to someone who does drugs, due to civil forfeiture. Is that fair?
Don't bother answering the questions. You are an idiot. Just go away.
Do you realize that al qaeda funds themselves with drug money? Half of the left wing regimes in south and central America that hate us fund themselves with drug money. Do you want people like Hugo Chavez to sell us both drugs and oil?
Relax, take a xanax or something. The reason they are able to sell us these drugs is because there is a huge demand in the US. I am sure this demand is not only from the left wing. Prohibition made wealthy men of many fugitives. Once there is the political stomach to decide that "people use drugs", just as they smoke and drink, one could make the argument that we can grow it and sell it domestically. Along with similar regulations as are applied to tobacco and alcohol (which kill many more people than al qaeda). Just think about it, openly, before you decide if one way or another is superior.
"I want you to notice Riley, that I've responded to you, as I do to everyone, in a gentlemanly fashion without calling you stupid, idiotic or a bunch of other assorted names. You're free to reply if you'd like."
I have no patience with you because your points are--SO STUPID!
You've made the following STUPID arguments in you numerous posts:
* People who forecast a dollar decline are unpatriotic
* People who question the wisdom of buying real estate at current prices are unpatriotic
* People who question any laws are unpatriotic
There is no reasoning with someone like you.
As for your points about drug
laws---you could make the same arguments about the arrests of blacks in the south for violating all sorts of racially based laws.
Just because something is "illegal" doesn't mean it is immoral, or that the punishment should be severe. The punishment should fit the "crime", and some "crimes" deserve no punishment at all, because the law itself is stupid.
Drug laws fall into that category. End of rant.
"Al Qeada and many leftist central and south american regimes are funding themselves through illegal drug sales. You've suggested that legalizing drugs will substantially reduce profits"
True. It is economic logic. Increase competition = reduced (or absent) profits.
If the goal is to reduce the income of the terrorists and leftist govts., then it would make sense to get them competing against each other, rather than against us.
"and appear to be suggesting that we should stop the war on drugs so we can reduce the funding of terrorist organizations. This at best is tortured logic and at worst just plain STUPID."
False. While that would be a side effect of ending the stupid war on drugs, I'd oppose our stupid drug laws even if there were no war on terrorists.
This has nothing to do with real estate, so I don't know why you bring it up, but I'll answer it anyway. But it will be my last comment on the topic.
The govt. has no right to tell you what you can eat, drink, or read.
Give them the authority to do it, you are on the road to tyranny.
"So drugs laws aren't just because some fool decides to get toasted and winds up in the slammer. What the hell is next? Someone wants to drive while drunk and thinks its unjust when he gets caught and gets arrested"
What a dumb analogy. By your reasoning, we should prohibit alcohol if we want to stop drunk driving.
Hiatory check--WE DID THAT AND IT MADE THINGS WORSE!
HELLO! WHY NOT JUST ARREST DRUNKS WHO HARM OTHERS, AND LEAVE THE PEACEFUL DRUNKS ALONE!?!?!?!
Likewise, why not arrest and punish those who harm others, while leaving otherwise law abiding drug users alone to suffer the consequences of their behaviors?
uh-oh
I feel it coming on......
"I don't know what I'm looking for anymore.
I just know that I'm harder to console.
I don't who I'm trying to be instead of me.
But the key is a question of control......."
BTW, Berkshire Hathaway's portfolio is loaded with insurers and reinsurers.. Who do you think is gonna pay when "Jewish Lightning" strikes after all those mortgages go underwater?
http://www.gothamist.com/archives/2006/05/03/greenpoint_term.php
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RickJ
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