- Election year
- Cap ex spending up this quarter
- Commodity inflation
- Employment up
- Government lowering credit quality
- Increase in housing starts in some markets
- Banks are passing losses onto homeowners with modifications and short sale acceptances finally allowed capital lost over the last 4 years to be out of play.
Wednesday, May 18, 2011
The Titanic is rising.....the tea leaves
Why? Ill keep it pithy...the tea leaves
Monday, February 14, 2011
The beginning of the RISE OF REAL ESTATE!!!
Ok guys credit is the driving force behind real estate. The easier it is for people to buy the easier it is to get into a home and affect demand.
We went down the spiral of tightening and values dropped. Now signs are showing that the pendulum is swinging the other way.
First fannie mae foreclosures are offering Homepath financing with down payments as low as 3% and credit scores in the 580's(C- credit)
Now FHA is offering financing for 500 and above. Folks you get a 350 for signing your name.
The recession has about 6 months left before people start to see signs of life to the point of being obvious. Check your neighborhood out and see if you see a stealth rally going on.
;>
We went down the spiral of tightening and values dropped. Now signs are showing that the pendulum is swinging the other way.
First fannie mae foreclosures are offering Homepath financing with down payments as low as 3% and credit scores in the 580's(C- credit)
Now FHA is offering financing for 500 and above. Folks you get a 350 for signing your name.
The recession has about 6 months left before people start to see signs of life to the point of being obvious. Check your neighborhood out and see if you see a stealth rally going on.
;>
Monday, December 6, 2010
I told you so again......
Gov't announces $12B profit on Citigroup
Government says it will earn $12 billion profit on $45 billion Citigroup bailout
, On Monday December 6, 2010, 10:15 pm
WASHINGTON (AP) -- The government says it has reached a deal to sell its remaining holdings of Citigroup common stock and will end up turning a profit of $12 billion on its bailout of the giant bank.
The Treasury Department said late Monday that a final offering of about 2.4 billion shares of Citigroup Inc. common stock had been priced at $4.35 per share. With the proceeds of the sale, the government will have realized $57 billion on its bailout package for the big bank.
Citigroup received $45 billion in taxpayer support late in 2008 in one of the largest bank rescues as the government struggled to contain the worst financial crisis to hit the country since the 1930s.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
The government said Monday that it will sell its remaining shares of Citigroup common stock and expects to turn a profit on its $45 billion bailout of the giant bank.
The Treasury Department said that it will sell about 2.4 billion shares of Citigroup Inc. common stock. The sale would begin immediately and would end when the government determines that it has received an acceptable price for the shares.
Citigroup received $45 billion in taxpayer support late in 2008 in one of the largest bank rescues as the government struggled to contain the worst financial crisis to hit the country since the 1930s.
The bailout of Citigroup and other large banks was begun under the Republican administration of George W. Bush but turned into a major political liability for President Barack Obama in last month's congressional elections.
Republicans took control of the House and gained six seats in the Senate by capitalizing on voter anger over the bailouts and soaring federal budget deficits.
The administration has insisted that the bailouts were needed to prevent an even deeper recession. They said the cost of the bailouts has been falling as Citigroup and other rescued institutions pay back their government loans. The latest estimate from the Congressional Budget Office in late November was that the $700 billion Troubled Asset Relief Program would end up costing the government $25 billion, down from an August CBO estimate of $66 billion.
Of the $45 billion in taxpayer support provided to Citigroup, $25 billion was converted to a government ownership stake that the Treasury has been selling off since last spring. The bank repaid the other $20 billion in December 2009.
Treasury had sold 5.3 billion shares of common stock before Monday's announcement. The planned sale of the additional 2.4 billion shares would complete the sale of Treasury's holdings of Citigroup common stock.
Treasury announced that at the end of October it had realized $42.8 billion in total proceeds from its Citicorp investments, including sales of common stock and interest and dividend earnings.
However, that total did not take into account 900 million additional shares of common stock that have been sold in recent weeks. While Treasury has not publicly released a figure for its earnings on those sales, a ballpark estimate brings the amount received for those shares to $3.6 billion.
When that $3.6 billion is added to the $42.8 billion that Treasury has announced receiving, it brings the total return to the government to $46.4 billion. That means the government is now in the black on the $45 billion in support provided to Citi from the $700 billion Troubled Asset Relief Program.
The ultimate earnings for taxpayers will rise further when the sales of the final 2.4 billion shares of Citigroup common stock are included.
"Selling off the remaining stake ensures that taxpayers will book a healthy profit on the Citigroup investment," said Linus Wilson, a professor of finance at the University of Louisiana at Lafayette.
Wilson estimated that Treasury could end up with a profit on its Citigroup bailout of around $9.4 billion.
In addition to the common stock, Treasury still holds Citigroup warrants that it has yet to sell. Those warrants give the holder the right to buy Citigroup common stock at a specified amount. Treasury is also entitled to receive up to an additional $800 million for the trust preferred shares of the bank that it owns.
Citigroup common stock closed at $4.45 in trading Monday and has ranged from a low of $3.11 to a high of $5.07 over the past 52 weeks.
Last week, Treasury announced it had received an additional $1.8 billion in net proceeds from the sale of General Motors stock, bringing the total it has received from an initial public offering of GM stock to $13.5 billion. The government put $49.5 billion into GM as part of its bailout of the giant automaker.
AP Business Writer Pallavi Gogoi in New York contributed to this report.
Thursday, September 30, 2010
I told you so
Back in March 2009 I told you why the government bailout wouldn't be as bad as every one thought.
And now here's why I said that......source http://www.crainsnewyork.com/article/20100927/FREE/100929866#
And now here's why I said that......source http://www.crainsnewyork.com/article/20100927/FREE/100929866#
September 27, 2010 9:48 AM
Treasury said to prepare AIG exit, repayment plan
Treasury will begin converting its $49 billion preferred stake into common stock for sale by the first half of next year.
Photo by Buck Ennis."> 
AIG and its government overseers are set to discuss terms of the exit strategy by Sept. 29.
Also See
Filed Under :
American International Group, Professional Services, Wall Street
(Bloomberg) -- The U.S. Treasury Department may announce plans as early as this week to return American International Group Inc. to independence and recoup taxpayer money from the insurer's bailout, according to three people with knowledge of the talks.
The biggest part of that strategy is for Treasury to begin converting its $49 billion preferred stake into common stock for sale by the first half of next year, said the people, who declined to be identified because the negotiations are private. The timing of an announcement depends on the pace of talks between regulators and the Manhattan-based insurer, and discussions may extend beyond this week, the people said.
The government is seeking to dispose of its AIG stake as Chief Executive Officer Robert Benmosche, 66, prepares divestitures of two non-U.S. divisions that he said would largely repay the firm's Federal Reserve credit line. MetLife Inc. said this month its purchase of American Life Insurance Co., for about $15.5 billion, is “on track” to be completed on Nov. 1. AIG may hold an initial public offering of another business, AIA Group Ltd., in October.
The insurer's objective is to “repay the taxpayers and position AIG, over time, as a strong, independent company worthy of investor confidence,” said Mark Herr, a spokesman for the firm. “We have been in discussions with the U.S. Treasury, the Federal Reserve Bank of New York and trustees of the AIG Trust over the terms of the government's exit from AIG.”
AIG would be required to hold at least a 30% stake in AIA for the first year after the Asian unit's listing, according to a preliminary IPO document sent to fund managers today. AIA shares are slated to start trading on the Hong Kong stock exchange on Oct. 29.
Hong Kong-based AIA will probably boost pretax operating profit to at least $2 billion for the fiscal year ending Nov. 30, AIG disclosed Sept. 25 after providing the forecast to certain analysts.
AIG and its government overseers are set to discuss terms of the exit strategy by Sept. 29 and may issue a statement after that meeting, said one of the people. Mark Paustenbach, a Treasury spokesman, and Jack Gutt of the New York Fed declined to comment.
AIG, once the world's largest insurer, was first rescued in September 2008 by the Federal Reserve. After three revisions, the firm's $182.3 billion lifeline includes a Fed credit facility, a Treasury investment of as much as $69.8 billion and up to $52.5 billion to buy mortgage-linked assets owned or backed by AIG.
The company, which in addition to the Treasury's preferred stake owes about $20 billion on the Fed credit line, is the only insurer yet to repay its Troubled Asset Relief Program rescue funds. Hartford Financial Services Group Inc. and Lincoln National Corp. repaid their bailouts, and this month Treasury raised more than $900 million selling warrants in the companies.
Treasury Secretary Tim Geithner said last week that the U.S. would “largely get the taxpayers' money back” from TARP. Estimates for losses on the $700 billion program are shrinking, Mr. Geithner said, citing a Congressional Budget Office estimate that TARP would cost $66 billion, compared with $105 billion in an earlier Treasury report.
AIA isn't selling new shares in the Hong Kong IPO. The entire proceeds from the share sale will go to AIA Aurora LLC, an AIG special purpose vehicle, to pay down preference units with a liquidation value of $16 billion owned by the Federal Reserve Bank of New York, said another preliminary IPO document sent to fund managers and seen by Bloomberg today.
AIG has climbed about 22% in New York Stock Exchange trading this year through Sept. 24. It slipped 4.5% last year and plunged 97% in 2008, the year write-downs tied to soured housing-market bets forced the insurer to take a rescue.
The firm's plan to gain independence “could result in the issuance of a large number of additional shares of AIG common stock,” the company said in the Aug. 6 filing. The new securities “could result in significant dilution to AIG's current shareholders,” the firm said.
The government's exit from AIG could be modeled after that of Citigroup Inc., in which the government sold shares through a set trading program, Benmosche has said. Citigroup is still 18% owned by Treasury.
AIG's trustees, a three-person panel, wield the government's almost 80% stake in the insurer and control votes on asset sales, mergers and the selection of top executives.
Treasury added two members to AIG's board of directors this year under an agreement that allowed for the appointments if the company skipped dividend payments on the government's preferred shares for four straight quarters.
Monday, October 19, 2009
Post script. The floors. The house.
Well here is the finished product on our latest house. Check er out!
I promised you in the previous post that I found those lovely floors under that carpet. Heres the finshing of them. For a real estate investor wood floors means more value per square foot. Appraisers will tell you that they cant give you credit for them unless they see them. Well here they are. This probably increased the value another $5-10k,
Initial belt sander with medium grit.
Look at that grain
Some of the old paint just wouldnt die. Needs a hand sander to get into some of the grooves.
Rich medium stain and sealer 2 coats.
I promised you in the previous post that I found those lovely floors under that carpet. Heres the finshing of them. For a real estate investor wood floors means more value per square foot. Appraisers will tell you that they cant give you credit for them unless they see them. Well here they are. This probably increased the value another $5-10k,
Initial belt sander with medium grit.
Look at that grain
Some of the old paint just wouldnt die. Needs a hand sander to get into some of the grooves.
Rich medium stain and sealer 2 coats.
Thursday, October 8, 2009
Updates--Recession?? What recession?
Well we have the property I mentioned in April 21 2009 under contract. Once it closes I will update you on the outcome. A hint the profit will be around 35k and the rehab cost about 4k.
The 4 bedroom home I mentioned April 9, 2009 has a tenant in there paying $650 a month. So after the 19k I spent in it I figured it will take 38-40 months to pay it off. Then its all free money!!!! Free and clear!
The last property Id like to mention is the one I discussed on the 14th. Id like to show you what we have done and give some insight as to how some rehab is done and maybe some pleasant surprises discovered along the way.
Step 1 Retire the 1950 door with the diamond window....gag! I could have left the door with natural wood but I wanted it to POP from the street. We painted this a medium blue. The back side however we polyurethaned it to maintain the wood grain look and accentuate the surprise we found inside.
Step 2 Replace the side door as shown here with a new slab door. Also we though long and hard about the siding. The previous owner tried to just hide it with hardipanel. But the new owners and buyers would constantly wonder "Whats under there?" Lap siding is in my opinion a classic timeless look so .....
side wall--before
after
Here are some more sections we took out and replaced with real wood siding.
Front of home--before
after
side of home before
after---the sill was rotted and had to be rebuilt.
Porch in rear --before; filled with mostly rotten trim pieces.
Pieces were replaced when in doubt.
after
And now for the best part: What would cause a man to pull up perfectly good carpet?
Ha ha you ask.
A suspicion and then pay dirt....pristine wood floors the previous owner was too lazy to strip and refinish. Look at that color. More of the outcome and the finished home within a couple of days.
The 4 bedroom home I mentioned April 9, 2009 has a tenant in there paying $650 a month. So after the 19k I spent in it I figured it will take 38-40 months to pay it off. Then its all free money!!!! Free and clear!
The last property Id like to mention is the one I discussed on the 14th. Id like to show you what we have done and give some insight as to how some rehab is done and maybe some pleasant surprises discovered along the way.
Step 1 Retire the 1950 door with the diamond window....gag! I could have left the door with natural wood but I wanted it to POP from the street. We painted this a medium blue. The back side however we polyurethaned it to maintain the wood grain look and accentuate the surprise we found inside.
Step 2 Replace the side door as shown here with a new slab door. Also we though long and hard about the siding. The previous owner tried to just hide it with hardipanel. But the new owners and buyers would constantly wonder "Whats under there?" Lap siding is in my opinion a classic timeless look so .....
side wall--before
after
Here are some more sections we took out and replaced with real wood siding.
Front of home--before
after
side of home before
after---the sill was rotted and had to be rebuilt.
Porch in rear --before; filled with mostly rotten trim pieces.
Pieces were replaced when in doubt.
after
And now for the best part: What would cause a man to pull up perfectly good carpet?
Ha ha you ask.
A suspicion and then pay dirt....pristine wood floors the previous owner was too lazy to strip and refinish. Look at that color. More of the outcome and the finished home within a couple of days.
Saturday, July 25, 2009
De-Leveraging---The New Math
Ok gang. All my real estate buddies are saying the same thing. "Ive got heartburn from 2006.", "Im screwed.", "How can I sell this house thats 20k above what its worth? Id love to fire sell it".
My solution? Buy more. Buy more at todays prices. And buy low just like you always have.
The logic for this is very similar to dollar cost averaging with stocks. Buy a stock for $100 that drops to $10. You lost $90 on paper. Specifically its on paper. You dont really lose until you sell. It may go up in value. This is a very important principal when you position your exit point for sale.
Ok so check this out. You buy a stock for $100 that now is worth $10, $90 less than what you paid for it. If you buy 1 more stock at $10, you have 2 stocks worth $110 in cash. Your overall loss is only $45 from $90. If they sold at $55 you would breakeven. Ah but not yet. The price is still only worth $10. So you buy another stock for $10 and now you have 3 stocks at $120 that have a breakeven at $40. The change rate gets diminshed as we approach $10; so with two more stocks bought at $10 we have $150 we have a break even at $30. What a big difference from $90! The loss is now reduced $70 to $20 from $90 if the price were to stay the same price of $10.
What a dramatic turnaround. A $90 loss reduced to $20 if the stock stayed exactly the same.
Now folks we dont buy things because they stay the same. We buy them because they go up in value. Isn't it easier for a price to get from $10 to $30 than it is to $90. LOL. Not a trick question dont answer that one.
So with real estate we do the same thing. Now unlike stocks, real estate is a more inefficient market. We don't have market makers(stock jocks who collaborate on what things are worth) over price. We have the open market of buyers and sellers.
We buy houses at a discount and leverage bad situations to our numerical advantage. We leverage distressed properties that need repairs or properties that banks wont finance in their current state. They entice us to buy because of the distress. We dont buy a $100k house with $20k in work for $80k. Most would rather buy that same house for $100k and NOT do the work. The market agrees. We pay $60k or $50k for that $100k house to do the $20k work to get $20k+ sweat equity.
So back to our math problem imagine buying a $30 stock for $10. And now the math becomes clearer. We create our exit by continuing to do what we do. Buy and sell houses. Buy low and sell higher. It may not be at 2006 prices, but the profit made will give you the antacid to digest the heartburn of prices dropping and stale inventory.
Get back in tha' saddle and ride!!!!
Your bud in the business,
Wes
My solution? Buy more. Buy more at todays prices. And buy low just like you always have.
The logic for this is very similar to dollar cost averaging with stocks. Buy a stock for $100 that drops to $10. You lost $90 on paper. Specifically its on paper. You dont really lose until you sell. It may go up in value. This is a very important principal when you position your exit point for sale.
Ok so check this out. You buy a stock for $100 that now is worth $10, $90 less than what you paid for it. If you buy 1 more stock at $10, you have 2 stocks worth $110 in cash. Your overall loss is only $45 from $90. If they sold at $55 you would breakeven. Ah but not yet. The price is still only worth $10. So you buy another stock for $10 and now you have 3 stocks at $120 that have a breakeven at $40. The change rate gets diminshed as we approach $10; so with two more stocks bought at $10 we have $150 we have a break even at $30. What a big difference from $90! The loss is now reduced $70 to $20 from $90 if the price were to stay the same price of $10.
What a dramatic turnaround. A $90 loss reduced to $20 if the stock stayed exactly the same.
Now folks we dont buy things because they stay the same. We buy them because they go up in value. Isn't it easier for a price to get from $10 to $30 than it is to $90. LOL. Not a trick question dont answer that one.
So with real estate we do the same thing. Now unlike stocks, real estate is a more inefficient market. We don't have market makers(stock jocks who collaborate on what things are worth) over price. We have the open market of buyers and sellers.
We buy houses at a discount and leverage bad situations to our numerical advantage. We leverage distressed properties that need repairs or properties that banks wont finance in their current state. They entice us to buy because of the distress. We dont buy a $100k house with $20k in work for $80k. Most would rather buy that same house for $100k and NOT do the work. The market agrees. We pay $60k or $50k for that $100k house to do the $20k work to get $20k+ sweat equity.
So back to our math problem imagine buying a $30 stock for $10. And now the math becomes clearer. We create our exit by continuing to do what we do. Buy and sell houses. Buy low and sell higher. It may not be at 2006 prices, but the profit made will give you the antacid to digest the heartburn of prices dropping and stale inventory.
Get back in tha' saddle and ride!!!!
Your bud in the business,
Wes
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