Investors and property agents were jumping for joy last week when billionaire Warren Buffett predicted that U.S. residential problems will be largely behind us within a year or so.

On page 11 of his annual letter to shareholders, the great man opined that the US housing industry was currently in a shambles for two reasons.

The first, and most obvious, was that during the prolonged boom, housing starts ran at about 2 million annually, while household formation amounted to about 1.2 million annually.

After a few years of such large imbalances, the USA unsurprisingly ended up with far too many houses.

Jokingly, Buffet offered three ways to adjust the imbalance:
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1. Blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program.

2. Speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers.

3. Reduce new housing starts to a number far below the rate of household formations.

Housing Starts Now at Record Lows
With housing starts at 554,000 last year, the lowest since records began in 1959, Americans are well on their way to correcting this imbalance. As Buffett stated, “our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious”.

His second reason for the current distress in the US Housing market was due to the large gap in mortgage availability and interest rates offered to people who purchase site built homes vs factory built homes. This is a particular bugbear for Mr Buffett as his company owns an big factory home builder called Clayton Homes .

Far be it from me to read too much into the latest message from the worlds´ most celebrated investor, but I can imagine that he must constantly be toning down his messages to the general public due to his unique influence on the markets. If he came right out and said “you know what folks, 2010 is a pretty good time to purchase undervalued real estate because the market is well on its way to correcting imbalances during the boom years” there would probably be stampedes of investors trying to snap up available inventory all over the country.

If there were stampedes of investors all of a sudden, no doubt some of them would be pounding on the big doors of the beautiful clubhouse in Mosaic at Mall of Millenia . At the moment, properties in this resort start at just €44,000 ($60,900) have 97% occupancy and we have 7 units with double digit net yields.

It is probably worth mentioning that we mean real double digit net yields. Perhaps unsurprisingly, and no doubt in their excitement to promote a new product, some agents forget to include all the monthly costs before advertising how great the rental returns are.

No matter where you buy in the USA, you will get your real net yield when you subtract HOA fees, real estate tax, rental management fees and home insurance from your average monthly income. Anything else is misleading. In a lot of states (but not Florida), you´ll have to account for state tax as well.

What if Mr. Buffett´s prediction is right?
Let´s assume for a moment that his prediction of a US housing recovery sometime in 2011 is correct and let´s also bear in mind that people who have betted against him in the past haven´t done so well.

Is it better to wait until 2011 and start investing in property once prices start recovering? Or might it be worth using some money sitting in a (very) low interest savings account to purchase well priced high quality properties while they are still available?

It´s been a crazy 18 months in the real estate business, but as the Sage of Omaha himself said “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”.

Translation: These fluctuations caused a flood of motivated sellers to appear. They won´t stay so motivated indefinately.

Destroy RE/MAX and Keller Williams in New England

Company Takes Aggressive Moves to Provide Real Estate Professionals Better Benefits

Boston, Mass. – January 25, 2010 – Next Level Realty is on the hunt for the best real estate professionals in Massachusetts, Rhode Island, New York, Connecticut, Virgina, Florida and New Hampshire and they’re willing to beat RE/MAX and Keller Williams to have the best team.

“We are the best place for real estate agents, teams and brokers in the New England region,” said Adam Bailey with Next Level Realty . “RE/MAX and Keller Williams simply can’t touch our entire package. Agents will net much higher commissions and have better technology platforms that will save them time and money in their business structure.”

Next Level Realty is stepping up its commission paid to real estate professionals in excess of the area average. Agents at Next Level Realty now average a net of 94 percent of their commissions after all fees. They also receive a higher than industry average recruiting bonus that is paid quarterly.

However the innovative company is also taking the competition once step further by offering its agents and brokers 6% profit sharing in the company.

“Our team will be the best in the area and they deserve to share in the profits of the company,” Bailey said. “But we will only take the best Realtors, teams and brokers in the area from our competition.”

Along with simply the best compensation in the Boston area, Next Level Realty also takes its technology to the next level for its professional team.

The company creates a custom Wordpress Platform website with an IDX feed for all of its agents that they own as their own proprietary asset. Also it uses technology to help agents save time working on the go without being constantly in the office. The results are agents have more time, money and energy by being virtually connected to the office at all times.

“Our competition truly can’t compete with us on the compensation structure or use of technology,” Bailey said. “The office on every corner is a dying breed and Next Level Realty will be there with a better system to pick up the pieces of all those failed offices and bring structure to the NEW real estate world.”

A 2004 Boston Business Journal honoree as a Top 25 Firm in the Real Estate Business, Next Level Realty is changing its business model away from former partnerships with Landmark Realty and Realty Direct. Instead, the company is creating a new type of real estate company that truly uses cost savings and innovation to drive the business. It will also compete in the residential, commercial, mortgage and insurance business delivering a one stop real estate destination for its clients.

“Agents selected for the Next Level Realty team can compare our innovative processes, technology and compensation to any other company and we will be the clear leader,” Bailey said. “We are the true innovators in the industry, but if they do find someone that can beat us, we will match the offer presented to us.”

Next Level Realty is also planning to license its product across the country, including the possibility of merger and acquisition opportunities with companies with a similar mission and vision.

For more information about Next Level Realty please call 617-799-7749 or visit their website at www.nextlevelrealty.com .

Media Contact:

Adam Bailey

Next Level Realty, Inc

Phone: 617-799-7749

Read more
Click here to read more about the history of the Yacht Haven auction.
Boston’s Yacht Haven marina is under agreement and is slated to sell for an eye-popping $9.9 million in January, federal bankruptcy court documents show.

The sale price is nearly $2 million more than the $8 million credit bid that North End marina’s current owner, Northern Bank & Trust, paid at bankruptcy auction in August. No private bidder came close to matching that price at auction, with most bidders quitting the action at $5 million.
The $9.9 million figure is also close to the $10.1 million face value of Northern Bank’s 2005 mortgage on the 4.75-acre property.
According to a purchase and sale agreement on file with the bankruptcy court, Northern Bank has set a Jan. 8 closing date for the property. The buyer is Boston Boat Basin, LLC.
Paperwork on file with the secretary of state’s office shows Boston Boat Basin is controlled by prominent Newburyport developer Charles Lagasse. The LLC shares an address with Newburyport Development, a unit of Steve Karp’s New England Development. Neither Lagasse nor New England Development could be immediately reached for comment.
At the August auction, many attendees argued the marina’s former owner, Yovette Mumford, had grossly overpaid for the waterfront property. Mumford, the former sister-in-law of Congressman Ed Markey, took the waterfront gem from Modern Continental for $11.7 million in 2005. Auction attendees told Banker & Tradesman that Yacht Haven’s marina business wasn’t worth nearly that much, and that Mumford could have only justified the purchase price by redeveloping the site and operating it in violation of a series of deed restrictions.
The marina’s Commercial Wharf neighbors appear to believe that is still the plan. A bankruptcy court motion filed today by the Commercial Wharf East Condominium Association argues Northern Bank is attempting to sell the property free of any litigation currently attached to the site. The condo association’s land court suit restricted the marina’s parking and barred Mumford from operating the business as a restaurant, bar or function hall. The bank has also asked the bankruptcy court to bar the state’s land court from maintaining jurisdiction over deed restriction disputes. That, the condo association’s brief argues, would amount to an end-run around the site’s deed restrictions, making it much more valuable.
Northern Bank has rebutted this argument, telling the bankruptcy court that Boston Boat Basin has “repeatedly announced its intention to abide by” the restrictions.