Raphael Stevens

Life Changes

First-time home buyers face a steep learning curve, needing to get a handle on mortgages, budgeting and other intricacies.
Tips include cleaning up your credit score before applying for a mortgage, and striving to keep prospective housing costs to no more than 20% of income.
Overestimate what you think your post-purchase expenses, such a furniture, will be.

Paul Bradbury | OJO Images | Getty Images

First-time home buyers have a steep learning curve, from understanding true affordability and how to qualify for a mortgage to managing their cash flow after their purchase.
“When buying your first home, you need to consider that what a lender will let you borrow is not necessarily the same amount as what you can reasonably afford,” said certified financial planner Eric Roberge, founder of Beyond Your Hammock in Boston.

While most banks will let you take out a loan with a payment around 30% of your income, Roberge advises clients to keep their annual housing costs (mortgage payments along with property taxes, homeowner’s insurance and annual maintenance) to 20% of their gross income.

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Here’s a look at other stories offering a financial angle on important lifetime milestones.

“In today’s environment, they’re buying the payment, not the purchase price,” said CJ Harrison, CFP, vice president of DecisionPoint Financial in Mesa, Arizona. “But they need to keep in mind that these are super inflated home prices.
“I ask these clients, ‘Can you stomach financially a catastrophic decline in your home’s value?'”
To bring his clients down to earth, Brian Mercado, a CFP with JSF Financial in Los Angeles, has them do an exercise.
“I tell them that, while they are house-hunting, they should try to live as if they were already making that larger payment,” he said. “It’s a stress test on their cash flow.”

While buyers get used to the new budget, Mercado invests the excess monthly savings so it can be added to the down payment.
You don’t want to outgrow your new house, said Stephanie Campos, CFP, owner of Campos Financial in Miami. She asks clients questions such as “Will this house meet your needs for more than five to 10 years?” and “Are the mortgage and closing costs worth it, if you need to buy another place in a few years?”

Tips for mortgages

Before applying for mortgages, it’s essential to clean up your credit score if necessary, according to Campos.
“The advertised teaser rates are only for excellent credit and [in general, bank rates are a moving target dependent on the risk appetite of the lender,” she said.
Campos advises home-seekers with credit scores under 600 to look into mortgages back by the Federal Home Authority. These are geared toward first-time homebuyers who have difficulty saving up the 20% down needed to avoid private mortgage insurance, she said. FHA loans may require as little as 3.5% down but come with slightly higher rates and certain payment and income requirements.
A way for buyers to avoid having to get private mortgage insurance, or PMI, Mercado said, is to take out two separate loans — i.e., a mortgage for 80% of the needed amount, and a home equity line of credit for the balance.

Be patient before you start spending money after your purchase.

CJ Harrison
vice president of DecisionPoint Financial

Mercado also suggests buyers request multiple pre-qualification letters from lenders in different amounts for different negotiation strategies. For example:

If you don’t want to tip off the seller that you can pay more, use a letter that shows only the amount you need for the purchase.
If you are in a bidding war, use a letter with an amount that shows the seller that you can go higher.

Buyers should have a few on hand, in case they need to make an immediate offer, Mercado said.

Mortgages are one of the “most competitive arenas out there,” said Harrison, “so get the cost breakdowns and show them to other lenders.”
He tells buyers to get quotes from at least three mortgage sources and request a fee worksheet, which is preliminary and does not require a credit check, and/or a loan estimate, which is binding and requires a credit check.

After you buy

Overestimate what you think your post-purchase expenses will be, Harrison said, as furniture, yard maintenance and repair costs are high due to demand resulting from the hot housing market.
“Be patient before you start spending money after your purchase,” he said. “Pace yourself and preserve your emergency fund — and budget for future purchases instead of spending all your cash.” More

Berkshire Hathaway said Monday morning it agreed to buy insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash.
The conglomerate said the deal “represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021,” as well as a 16% premium to Alleghany’s average stock price in the past 30 days.

Warren Buffett at Berkshire Hathaway’s annual meeting in Los Angeles, California. May 1, 2021.
Gerard Miller | CNBC

Warren Buffett just announced his biggest deal since 2016.
Berkshire Hathaway said Monday morning it agreed to buy insurance company Alleghany for $11.6 billion, or $848.02 per share, in cash. The Omaha, Nebraska-based conglomerate said the deal “represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021,” as well as a 16% premium to Alleghany’s average stock price in the past 30 days. The deal is expected to close in the fourth quarter of this year.

This transaction would mark Berkshire’s biggest acquisition in six years when the conglomerate bought industrial company Precision Castparts for $37 billion, including debt.
Through its subsidiaries, New York-based Alleghany is involved in a number of different insurance businesses, including wholesale specialty, property and casualty, and reinsurance.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Buffett, Berkshire’s chairman and CEO, said in a statement.
Insurance is one of Berkshire’s bread-and-butter businesses as it already owns Geico auto insurance, General Re reinsurance and others that have been driving growth in recent years.
Alleghany CEO Joseph Brandon — who previously led General Re — hailed the deal as a “terrific transaction for Alleghany’s owners, businesses, customers, and employees,” noting that “the value of this transaction reflects the quality of our franchises and is the product of the hard work, persistence, and determination of the Alleghany team over decades.”

Alleghany and its units will operate independently after the deal closes.
The deal may surprise some Berkshire shareholders, as Buffett and his right-hand man — Vice Chairman Charlie Munger — have expressed frustration in their search for a big acquisition. In his 2022 annual letter to shareholders, Buffett said he and Munger found little that “excites” them in terms of large deals.
“Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway,” Buffett said. Jefferson W. Kirby is chair of the Alleghany board of directors.
Alleghany started out in 1929 as a holding company for railroads and eventually pivoted to insurance, which has parallels to Berkshire’s roots as a textile manufacturing company more than a century ago before it became a multifaceted conglomerate.
To be sure, $11.6 billion is a small number when compared with Berkshire’s massive cash hoard of $146.72 billion at the end of 2021.
“This is Berkshire’s largest full acquisition in a while, although the amount being spent ($11.6B) is relatively small and certainly doesn’t constitute the type of ‘elephant deal’ Buffett has repeatedly talked about,” Adam Crisafulli of Vital Knowledge said in a note.
Alleghany is being advised by Goldman Sachs and Willkie Farr & Gallagher through the transaction’s completion.
Monday’s deal comes after Berkshire’s Class A shares hit a record high last week, closing above $500,000 for the first time.

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Check out the companies making headlines before the bell:
Boeing (BA) – A Boeing 737-800 jet operated by China Eastern Airlines crashed in the mountains of southern China with 132 people aboard, with no immediate word on casualties. Boeing shares sank 5.8% in the premarket.

Anaplan (PLAN) – Anaplan agreed to be bought out by private-equity firm Thoma Bravo for $10.7 billion, or $66 per share in cash. The business planning software company’s stock had closed at $50.59 per share on Friday, and the stock surged 28.3% in the premarket.
Nielsen Holdings (NLSN) – Nielsen tumbled 18.6% in premarket trading after it rejected a $9.13 billion takeover bid, worth $25.40 per share, from a private-equity consortium. Nielsen said the bid significantly undervalues the company, best known for its TV ratings.
Alleghany (Y) – Berkshire Hathaway (BRK.B) is buying the insurance company for $11.6 billion in cash, or $848.02 per share, compared to Alleghany’s Friday close of $676.75 per share. Alleghany will operate as an independent subsidiary of Berkshire.
General Motors (GM) – GM bought Softbank’s $2.1 billion stake in its Cruise driverless-car division. It also announced it would invest an additional $1.35 billion in cruise, replacing funds that Softbank had pledged to provide. GM initially fell more than 1% in the premarket but then pared those losses.
SAP (SAP) – SAP fell 2% in the premarket. Chief Financial Officer Luka Mucic is departing the German business software company at the end of March 2023.

Manchester United (MANU) – Deutsche Bank upgraded the soccer team’s shares to “buy” from “hold,” saying Manchester United is undervalued relative to its peers in the sports and live events category. Manchester United gained 1.6% in premarket action.
Nio (NIO) – Nio said it had no immediate plans to raise prices on its electric vehicles, although China-based carmaker said it would be flexible on pricing. Rivals like Tesla (TSLA) and BYD have recently raised prices due to higher materials costs.
BlackBerry (BB) – The communication software company’s stock added 2.1% in the premarket after RBC upgraded it to “sector perform” from “underperform,” saying the stock’s price is now more aligned with BlackBerry’s fundamentals.

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Nike’s post-earnings comments Monday could be a harbinger of how other retailers are seeing the impact of a war overseas, sky-high oil prices and inflationary pressures.
The sneaker giant is set to report its results for the fiscal third quarter after the market closes, amid global unrest and clogged supply chains.
Nike’s exposure to China is also under a microscope, as the U.S. may choose to impose serious consequences if Beijing helps Russia wage its war against Ukraine and Western brands face continued boycotts throughout Asia.

Shoes line the shelves at the Nike store on December 21, 2021 in Miami Beach, Florida.
Joe Raedle | Getty Images

Nike’s post-earnings comments Monday could be a harbinger of how the retail industry is being affected by the war in Ukraine, sky-high oil prices and inflationary pressures that threaten to curtail consumer spending.
The sneaker giant is set to report its results for the fiscal third quarter after the market closes. Nike’s exposure to China is also under a microscope, as the United States may choose to impose consequences if Beijing helps Russia wage its war against Ukraine and Western brands face continued boycotts throughout Asia.

Nike shares have traded down in recent weeks, as investors anticipate the retailer taking a hit from some of the aforementioned risks. The stock closed Friday at $131.24, down 21% year to date, compared with the S&P 500’s decline of 6%, and off a 52-week high of $179.10. Still, some analysts say shares can fall even further.
Nike is expected to report 2022 fiscal third-quarter revenue of $10.6 billion, on earnings of 71 cents per share, according to a survey of analysts by Refinitiv.
Here are some of the key topics analysts are watching and expecting Nike to address later Monday.

Outlook poised to disappoint

UBS analyst Jay Sole thinks Nike’s fourth-quarter and initial fiscal 2023 outlooks, should the retailer offer them, are going to disappoint investors.
“Our checks suggest Nike’s China business is not recovering as fast as we, or the market, expected,” Sole wrote in a note to clients. Plus, he said, the market has been underestimating the effects of the persistent global supply chain challenges that have delayed manufacturing and shipments, Nike’s temporary suspension of business in Russia, higher oil prices and a rising U.S. dollar that will pressure Nike’s forecast for profits.

Earlier this month, Nike said that given the rapidly evolving situation in Russia, along with increased operational challenges, it paused its business there. At this point, it’s unclear how long that will persist. The company has 116 retail stores in Russia, representing less than 2% of its total sales, according to analysts’ estimates.
“We think Nike’s third-quarter report will cause the market to see the company’s earnings rebound happening later than currently believed,” said Sole.
Analysts polled by Refinitiv see Nike’s total sales growing 2.3% in the fourth quarter compared with a year earlier. For fiscal 2023, Wall Street anticipates Nike’s sales will amount to $53 billion, up 13% from the prior year.

China risk

Barclays analyst Adrienne Yih said the bigger and longer-term obstacle for Nike will be China, which accounted for 19% of Nike’s sales in fiscal 2021, which ended on May 31.
In early 2021, sales at brands including Nike and its rival Adidas plunged in China due to a boycott among Chinese citizens of Western brands. The outrage was sparked over allegations of forced labor in the cotton industry around the Xinjiang region, where Uyghur Muslims are a prominent minority group. These allegations were denied by the Chinese government, but brands including Nike took a stance of not using Xinjiang cotton.
When Nike reported its second-quarter results in late December, Chief Financial Officer Matt Friend told analysts on a conference call that Nike was seeing “encouraging signs” in China. Still, the company expected fiscal 2022 to be a year of recovery in the region, he said. Later on the call, Chief Executive John Donahoe said Nike was taking the long-term view in China and creating new products that are tailored to the Chinese consumer.
Nike may not see a positive catalyst until June or later, said Morgan Stanley analyst Kimberly Greenberger.
She flagged the recent renewed Covid lockdowns in China as another risk for Nike and its peers.
“[China] has been a focus point for investors in the last year amidst the boycotts and inventory challenges, with investors specifically debating whether underperformance is demand or supply driven,” wrote Greenberger, in a note to clients. “It’s unlikely third-quarter results resolve these lingering debates.”
Separately, Citi retail analyst Paul Lejuez said his team conducted a survey of 1,000 Chinese consumers earlier this month to gauge how they feel about Nike compared with other brands, including those based in China. The poll found that Chinese consumers continue to rate Chinese sportswear brands, such as Li Ning, as in line with or better than Western brands. However, he said that Nike and Adidas appear to be in relatively good standing.

Wholesale distribution plans

Also on analysts’ and investors’ radar is Nike’s commentary around its relationships with wholesale partners. The athletic footwear giant has been pursuing a clear shift toward selling more of its shoes and apparel directly to consumers, rather than through third parties, in a bid to boost profits and raise affinity for its brand.
Foot Locker, one of Nike’s biggest vendor partners, disclosed in late February that its mix of sales from Nike will fall from 65% in the fourth quarter of 2021 to 55% in the fourth quarter of 2022, with a chance it will drop even lower.
Analysts at Credit Suisse have estimated that this could account for a loss of between $600 million and $800 million in wholesale revenue for Nike in fiscal 2023.
“While we didn’t think Nike would pivot so quickly as to disrupt Foot Locker’s cash flows so meaningfully, we understand why Nike would want those sales represented through its owned channels,” said Credit Suisse analyst Michael Binetti.
As of Nov. 30, direct-to-consumer revenue accounted for roughly 41% of Nike’s overall business. Investors will be looking for more color on how that figure could keep growing from here and what partners Nike will remain most reliant on.

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A Rocky Mountain mansion owned by Russian oligarch Roman Abramovich would likely be among the first assets frozen by the U.S. government if he is sanctioned.
Among Abramovich’s many global real-estate trophies is a 14,000-square-foot modern mega-home on 200 acres in Snowmass, Colorado, just outside of Aspen.

Rocky Mountain mansion owned by oligarch Roman Abramovich outside Aspen, Co.
Courtesy: Pitkin County Assessor

A Rocky Mountain mansion owned by Russian oligarch Roman Abramovich would likely be among the first assets frozen by the U.S. government if he is sanctioned by the White House in response to the war in Ukraine, according to attorneys and real-estate executives.
Among Abramovich’s many global real-estate trophies is a 14,000-square-foot modern mega-home on 200 acres in Snowmass, Colorado, just outside of Aspen. The Russian billionaire, whose yacht fleet, soccer team and giant homes in London, France and St. Bart’s gave him a high profile in the West, bought the property in 2008 for $36.5 million. Local brokers say the property would likely sell for well over $50 million given soaring prices — making it the second most expensive home ever sold in the Aspen area.

“It’s an incredible property, and very rare,” said Riley Warwick, co-founder of Aspen-based brokerage team Saslove & Warwick at Douglas Elliman Real Estate. “A lot of my clients have been asking about it.”
Abramovich also owns a 5,500-square-foot chalet-style home in Snowmass Village, which he purchased in 2008 for $11.8 million, according to local property records. The property, just down the road from his bigger home, likely serves as a guest house, caretaker’s house or ski house, since it’s next to the slopes, local brokers say.
Experts say the properties are prime targets for an asset freeze if Abramovich is sanctioned. Unlike most oligarch-owned real estate in the U.S., the Snowmass properties were both purchased and remain in Abramovich’s name, according to local property records. The government can more easily and quickly seize assets that are under the official ownership of a sanctioned individual, since they don’t have to go through legal procedures to determine ownership.
Most U.S. real-estate owned by Russian billionaires and oligarchs is held through anonymous shell companies or LLCs to hide their true ownership. Many oligarchs also transferred their U.S. properties in recent years to relatives or associates. Oleg Deripaska has transferred his U.S. real estate, including two townhouses in Manhattan and a home in Washington, D.C., to relatives. Abramovich transferred ownership of three Manhattan townhouses to his ex-wife Dasha Zhukova in 2018.
Abramovich has been sanctioned in the U.K. and Canada but not in the European Union or the U.S. The White House is currently weighing whether to include Abramovich in its next round of sanctions, according to people familiar with the discussions.

Abramovich’s spokesperson couldn’t be reached for comment. A Denver attorney, Brad Schacht, who represented Abramovich in a lawsuit against Comcast Cable stemming from a fiber-optic project on the property, didn’t respond to a request for comment.
The threat of a Justice Department seizure has already sparked widespread speculation and intrigue in Aspen, a small town with outsized wealth and super-sized homes. Wal-Mart heiress Ann Walton Kroenke, L Brands founder Leslie Wexner, food-and-beverage magnates Stuart and Linda Resnick own homes there, along with Jeff Bezos’ parents and media tycoon Byron Allen. Goldie Hawn and Kurt Russell are longtime Aspenites, and the Kardashians, Kate Hudson and Kevin Hart are among the parade of regular Hollywood visitors.
Locals say Abramovich used to have a higher profile in town, hosting a New Year’s Eve party in 2008 featuring the Pussycat Dolls. He has also given to local charity, with his name listed prominently as a donor on the side of the Chabad of Aspen. Local property tax records show he was recently billed $68,000 in property taxes for the big house and $29,000 for the smaller property.
Over the past decade, however, Abramovich has stayed out of the local limelight. Local business owners and residents say he rarely if ever visits. The property is ideally suited for privacy, surrounded by 200 acres at the end of a remote, narrow mountain road with only one other home. Abramovich could easily make the 15-minute drive from his private jet and stay in his house without any public scrutiny, locals say.
“That house is very private and removed,” real-estate broker Warwick said. “He could easily slip in and out without anyone noticing.”
The home is well known in architectural circles and was designed by New York-based Voorsanger Architects. Perched nearly 1,000 feet above Snowmass Village, it rises like a giant glass wedge along Wildcat Ridge. Its steel folded-plate roof, which looks like a giant wing, was designed for heavy snow loads and cantilevers 40-feet over the driveway.
Inside, the home is clad in sleek black walnut with floor-to-ceiling windows offering dramatic views of Capitol Peak, Mount Daly, the Roaring Fork Valley and Aspen. A 12-foot-tall moss-rock wall divides the east and west wings. Brokers say Abramovich added millions of dollars worth of improvements to the home, including space underground.
If Abramovich is sanctioned, the U.S. Justice Department’s new KleptoCapture Task Force would likely be able to freeze the property, but not seize it or take ownership. Sanctions experts say the only way the government can take title is if they can prove Abramovich has committed a U.S. crime.
Meantime, potential wealthy buyers are already circling. Like many ultra-rich towns after the pandemic, Aspen has a shortage of luxury homes for sale, with far more buyers than sellers. Supply of single-family homes in Aspen is down 60% from a year ago, according to Douglas Elliman Real Estate. The average sale price of a home in Aspen is now a record $13 million.
“A lot of my clients are asking what the status of the home is, and whether it’s been frozen,” Warwick said. “There has been no information.”
Warwick said brokers hungry for listings have also likely been reaching out to Abramovich to get him to sell.
“He’s not the easiest guy to get a hold of right now,” he said. “But I wouldn’t be surprised if lots of brokers are trying.”

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