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New CEO at Buffett's HomeServices says buyers, sellers can handle tariffs, changes

New CEO at Buffett's HomeServices says buyers, sellers can handle tariffs, changes

Reuters01-05-2025

OMAHA, Nebraska, May 1 (Reuters) - The new chief executive of Berkshire Hathaway's (BRKa.N), opens new tab HomeServices of America said worries about the impact of tariffs on mortgage rates are weighing on home buyers and sellers, but were unlikely to significantly dent sales of existing homes.
"When mortgage rates are fluctuating because the underlying economy is fluctuating, it causes buyers and sellers to stay on the fence," Chris Kelly, who took over the largest U.S. residential real estate brokerage on April 15, said in a recent interview.
Higher borrowing costs contributed to a greater-than-expected 5.9% drop in March U.S. sales of existing homes, to a seasonally adjusted 4.02 million unit annual rate, with more weakness likely as tariffs fan fears of a recession.
"The high degree of volatility we've seen in the last couple of months is giving buyers and sellers a little bit of pause," Kelly said. "But there are still 4 million people who are going to make a move this year."
HomeServices is a unit of Berkshire Hathaway Energy, which is part of Warren Buffett's conglomerate, and owns or franchises more than 2,200 brokerage offices with over 82,000 agents.
It lost money in 2024, largely from its $250 million settlement of antitrust litigation accusing the National Association of Realtors and brokerages of inflating commissions.
HomeServices was the last defendant to settle the landmark case, though Berkshire Hathaway Energy faces related claims.
The brokerage commission settlement ended the practice of having sellers pay commissions, typically 5% to 6%, to their agents, who would split them with buyers' agents.
Splits would be communicated over private databases known as multiple listing services (MLS), which only agents would see. Sellers claimed this was secretive and inflated closing costs.
The NAR's Clear Cooperation Policy, opens new tab requires agents to list properties on their MLS within one business day of marketing the properties to the public.
Supporters say it adds transparency and provides equal access to listings, while critics say it restricts sellers' ability to choose marketing strategies.
"That's where the current battlefront is: what happens if more properties are listed as exclusives, or marketed with more limited exposure," Kelly said. "From our perspective, the vast majority of properties benefit from the widest exposure possible, which means putting it in the MLS."
He added that "We always want the consumer to have a high degree of clarity on the fee and commission structure."
HomeServices has curbed its once aggressive appetite to buy brokerages to fuel growth, and Kelly said it will likely emphasize "tuck-ins" of brokerages that might struggle to compete on their own.
But he also said HomeServices has diverse revenue streams from mortgages, title and insurance, citing its stake in nationwide underwriter Title Resources Group, which can cushion the blow when one segment falters.
Kelly, 49, joined HomeServices' network in 2007 when he left private law practice to become general counsel at Kansas- and Missouri-based ReeceNichols.
He later moved to the parent company. Kelly reports to Berkshire Vice Chairman Greg Abel, who is expected to succeed Buffett as chief executive.

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TRADING DAY Good vibrations turn sour
TRADING DAY Good vibrations turn sour

Reuters

time33 minutes ago

  • Reuters

TRADING DAY Good vibrations turn sour

ORLANDO, Florida, June 11 (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. The US and China have reached a trade deal, or at least agreed on the framework of a deal, which together with surprisingly soft U.S. inflation data, gave markets a lift on Wednesday. But Wall Street's gains were mild, and they were later wiped out by rising tensions in the Middle East. In my column today I look at the 'equity risk premium' and other metrics that suggest relative U.S. equity and bond valuations are getting very stretched. More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves Good vibrations turn sour It's a "done" deal, according to U.S. President Donald Trump, although the he and Chinese leader Xi Jinping still have to finalize the wording of the trade agreement between the two superpowers and sign off on it. The main points of the deal appear to be: China will remove export restrictions on rare earth minerals and other key industrial components; U.S. tariffs on Chinese goods will total 55%; Chinese tariffs on U.S. goods will total 10%. Trump could not have been more enthusiastic in his praise for the agreement on Wednesday, and Commerce Secretary Howard Lutnick said 'deal after deal' with other countries will follow in the weeks ahead. Yet, judging by the relatively muted market reaction, investors are less enthused. And given the chaotic and unpredictable nature of the Trump administration's tariff announcements thus far, the irony of Treasury Secretary Scott Bessent calling on China to be a "reliable partner" in trade negotiations will not be lost on some observers. Especially, one suspects, in Beijing. Based on these proposed China levies, and with the US expected to conclude more trade deals in the coming weeks, the overall U.S. effective tariff rate will be lower than feared a couple of months ago. That's a relief. But the effective tariff rate of around 15% that many economists expect will still be significantly higher than the 2.5% rate at the end of last year, and would be the highest since the 1930s. Also, as the May inflation figures showed, tariffs have yet to be felt on prices. Investors - and Fed policymakers, who meet next week - are in a state of limbo. How will corporate profits and consumer spending be affected? What proportion of the tariffs will companies "swallow", and how much will they pass on to their customers? Zooming out, inflation appears to be cooling around the world, although this trend is expected to reverse once tariffs start to fuel higher goods price inflation. Figures on Wednesday showed that U.S. consumer inflation and Japanese wholesale inflation were lower than expected in May. These reports follow similar numbers from Europe recently, and China remains stuck in its battle against deflation. Next up is India, which releases consumer inflation figures on Thursday, which are expected to show annual inflation slowed to 3.0% in May, the lowest in more than six years. Another focus for investors on Thursday will be the auction of 30-year U.S. Treasury bonds. US stocks-bonds warnings flash amber again Calm has descended on U.S. markets following the 'Liberation Day' tariff turmoil of early April. But Wall Street's rally has revived questions about U.S. equity valuations, as stocks once again look super pricey compared to bonds. Since the chaotic days of early April, U.S. equities have rebounded fiercely, with the S&P 500 up 25%, putting the Shiller cyclically adjusted price-earnings (CAPE) ratio for the index in the 94th percentile going back to the 1950s, according to bond giant PIMCO. Stocks are looking expensive in absolute terms, and in relation to bonds. The equity risk premium (ERP), the difference between equity yields and bond yields, is near historically low levels. According to analysts at PIMCO, the ERP is now zero. The previous two times it fell to zero or below were in 1987 and 1996–2001. In both instances, the ultra-low ERP precipitated a steep equity drawdown and sharp fall in long-dated bond yields. "The U.S. equity risk premium ... is exceptionally low by historical standards," they wrote in their five-year outlook on Tuesday. "A mean reversion to a higher equity risk premium typically involves a bond rally, an equity sell-off, or both." But reversion to the mean doesn't just happen by magic. A catalyst is needed. Equities have recovered largely because they were oversold in April, trade tensions have been dialed down, and investors remain confident that Big Tech will drive solid AI-led earnings growth. So even though huge economic, trade, and policy risks continue to hang over markets, there is no sign of an imminent catalyst that would cause an equity market selloff. The flip side of equities looking expensive is that bonds look like a bargain. Indeed, the relative divergence between stocks and bonds is such that, by one measure, U.S. fixed income assets are the cheapest relative to equities in over half a century. Using national flow of funds data from the Federal Reserve, retired strategist Jim Paulsen calculates that the total market value of U.S. bonds as a percentage share of the total market value of U.S. equities is the lowest since the early 1970s. "Since the aggregate U.S. portfolio is currently aggressively positioned, investors may have far more capacity and desire to boost bond holdings in the coming years than most appreciate," Paulsen wrote last week. But bonds are 'cheap' for a reason. Washington's profligacy – the reason ratings agency Moody's recently stripped the U.S. of its triple-A credit rating – and inflation worries have kept yields stubbornly high. The term premium - the risk premium investors demand for holding long-term debt rather than rolling over short-dated loans - is the highest in over a decade, reflecting concerns about Uncle Sam's long-term fiscal health. And the diagnosis here shows no signs of improving. Trump's 'Big Beautiful Bill' is expected to add $2.4 trillion to the U.S. debt over the next decade, according to the nonpartisan Congressional Budget Office, likely putting more upward pressure on yields. Of course, equity investors do seem to be pricing in a very rosy scenario, and the past few months have shown how quickly the market landscape can change. The U.S. economy could weaken more than expected, the trade war could escalate, or there could be a geopolitical surprise that causes bond yields and equity prices to fall. Investors should therefore be mindful of the warnings being sent by ERPs and other absolute and relative valuation metrics. However, they should also remember that stretched valuations can get even more stretched. As the famous saying goes, markets can stay irrational longer than investors can remain solvent. What could move markets tomorrow? Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.

IMF, Serbia reach staff-level agreement on 36-month deal
IMF, Serbia reach staff-level agreement on 36-month deal

Reuters

time6 hours ago

  • Reuters

IMF, Serbia reach staff-level agreement on 36-month deal

BELGRADE, June 11 (Reuters) - The International Monetary Fund (IMF) and Serbia have reached staff-level agreement on the first review under a 36-month arrangement to help support economic reforms, the fund said in a statement on Wednesday. The so-called Policy Coordination Instrument (PCI) was signed in October to make it easier for the Balkan country to secure lending from other sources. Under the arrangement, Serbian authorities are committed to a fiscal deficit limit of 3% of gross domestic product over three years. The review will be subject to approval by the IMF Executive Board, the fund said in the statement which was issued after its two-week trip to Serbia. It also warned that downside risks for the economy were elevated. The IMF said political tensions over anti-government protests and blockades of state universities launched last November "may weigh on confidence". Serbia has seen months of anti-government rallies after 16 deaths from a railway station roof collapse triggered accusations of widespread corruption and negligence. The IMF warned that a global growth slowdown and increasing "geoeconomic fragmentation could negatively affect exports and foreign direct investment". However, it expects Serbia's economy to grow 3% this year and 4% in 2026. "Serbia has built up substantial buffers to respond to shocks — foreign exchange reserves and government deposits are high, public debt is declining, and banks are well-capitalised and liquid," the IMF said.

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