Publication Date:
Wed, 2012-06-20 10:34
Article Image:
Berkshire Hathaway CEO Warren Buffett's move to bid on Residential Capital LLC seems largely based on his belief that the U.S. housing market will soon get a boost from an excess of new households waiting to purchase homes. Photo credit: Deutsche Presse-Agentur
Further supporting his belief that the U.S. housing market is headed for recovery, Berkshire Hathaway CEO Warren Buffett announced Monday the investment firm had put in a $3.85 billion bid for troubled mortgage company Residential Capital LLC.
Residential Capital, a holding of Ally Financial, filed for bankruptcy in May, according to the Huffington Post [1]. The company and its loan portfolio are to be auctioned off separately. Berkshire Hathaway has reportedly filed to bid $2.4 billion for the business and $1.45 billion for the portfolio.
The acquisition seems to reinforce Buffett’s optimism about the housing market, detailed in his annual letter to shareholders released in February. He argued that despite the market doing poorly, Americans are still forming new households; eventually, says Buffett, the supply of available homes will have to catch up to this excess demand.
The Huffington Post notes that with property values rising and interest rates still extremely low, Buffett’s prediction could become a reality. The fact remains, however, that more than 11 million homeowners are still underwater on their mortgages, a primary obstacle to any prolong recovery effort.
To read the rest of the Huffington Post story, click here [1].
