Warren Buffett’s Take on the Housing Crisis
The Oracle of Omaha–sins of commission, omission, warts and all–has spoken, and he’s got his devout host of acolytes and admirers poring over every word of the Berkshire Hathaway annual letter to shareholders.
Housing, particularly the financial storm and economic crisis around housing, is getting some attention in the wake of the B-H annual report release.
In this report, MarketWatch’s John Spence dissects Warren Buffett’s extrapolation of the performance and business environment challenges for Berkshire’s Tennessee-based manufactured home builder Clayton Homes, as he offers observations about the broader housing economy’s dislocation. Connecting the dots from the modular home marketer’s customer base to the bubble-crazed housing boom of the first part of the decade, Buffett coins this year’s letter’s most quoteworthy quotes.
“Home purchases should involve an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrower’s income.”
In most cases, homes go into foreclosure simply because the borrowers can’t keep up with the monthly payment, not because they owe more than the house is worth due to falling prices, he said.“Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come,” he commented. “But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser.”Buffett still lives in the house in Omaha he paid $31,500 for in the late 1950s.“Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective,” he wrote. “Keeping them in their homes should be the ambition.”
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NATIONAL, STATE, or CITY HOUSE and LAND LOTTERY
SUPPORTS THE TAX BASE OF LOCAL COMMUNITIES
GENERATES WEALTH FOR WINNERS
KEEPS BANK FROM LOSING MONEY ON FORECLOSED PROPERTIES
employs construction workers
Say a city has 1000 foreclosed homes
The city can make arrangements with the banks that own a foreclosed property to enter the property into the raffle instead of auctioning them off at the court steps
For example purposes lets say each home is worth $150,000.00
Now the city sets an average payment for the foreclosed properties to be say $55,000.00
That brings a total of $55 million dollars to the all the banks of the 1000 foreclosed properties(banks receive this)
Now the city rasises through a Raffle $150,000 for each home and lets say they sell 3,000 tickets for each home at $50.00
Once all tickets are sold the amount raised on 1000 homes through lotto $150,000,000.00
You raffle off the property
The winners receive home outright.
City pays $55,000.00 to the bank for the property
for this example lets say out of the money raised the gov’t gives the winner $25,000.00 for remodeling or any other way the winner chooses to use it.
The city is left with a $70,000.00 profit on each property
on 1000 homes that equals $70,000,000.00
The city also benefit by being able to collect property taxes again. plus sales taxes if winners spend money on material things or businesses either remodeling the home or furniture sales. The winner has a new home with full equity.
all these numbers can be suited to individual gov’t preferences and purchase price of individual properties. You can raise as much money as you want on each home by selling more tickets. if it was a foreclosed house that was $224,000 to purchase from bank then raise $324,000.00 by selling 6480 tickets for $50.00 or 12960 tickets for $25.00 dollars.
Each home can be purchased by the local gov’t(in IOU form) and sold off in a lottery system. You can target a specific profit margin you want on each home by tickets offered for it.
So neighborhood benefits with better property values as homes are occupied and remodeled for more wealth.
Winner receives new home with no mortgage. so winner also wins wealth with the paid off home.
City makes profit on home. City receives property taxes. City takes care of homes sitting around doing nothing or causing eye sores.
Creates jobs for housing repairs.
1000 Number of foreclosed properties raffled off
$150.000.00 Price set for each of these properties
$150,00,000.00 total amount raised through raffle
$55,000,000.00 Amount paid to banks who own those 1000 properties ($55,000.00 for each property)
$25,000,000.00 Amount given to winners of the raffles ($25,000.00 for each winner)
$70,000,000.00 Amount city profits ($70,000.00 profit amount on each property)
Or create a national house raffle bank
have all the banks that have foreclosed properties to send those defaulted homes to the National raffle bank. The government then puts the homes up for raffle in the same mode as written above. Sell Stock in this bank. It will only generate a profit. Use the profits to pay small dividends and to pay for expenses which can be quite small if technology is used. It can be an online bank. Use the rest of the profits to pay on the national debt and pay the towns each individual home is located in also some of the profit. The banks will be freed to loan again with the monies they have received. It virtually keeps them from losing money on loan defaults. You still will create wealth to the winners of the properties which will give lots of people some capital to work with. The banks get the monies they would have otherwise lost out on. Also with this system we can save the consumer who defaulted on the loan credit woes cause as a deal since the home is raffled off we don’t place a foreclosure on their credit which will then keep them from filing bankruptcy. It can be a long term solution or just a short term one until we get out of this depression. If the gov’t can take a home with imminent domain laws then why can’t this be done?