Warren Buffett is Betting on Housing

The U.S. housing market disappointed Warren Buffett last year, but he hasn’t given up hope.

Buffett said in his annual shareholder letter, posted this weekend, that he was “dead wrong” when he predicted last year that the rebound in U.S. home prices would begin within a year.

This year, though, he’s betting again that the housing market will recover, and for an interesting reason: hormones.

As Buffett explains it, the housing market is currently depressed because young Americans have stayed at home rather than going out and setting up their own households.

“People may postpone hitching up during uncertain times, but eventually hormones take over,” Buffett wrote in the letter to shareholders in his investment company Berkshire Hathaway. “And while ‘doubling-up’ may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.”

That is not the entirety of his argument. He also says that home builders are not creating enough new supply. As a result, the excess inventory that built up after the financial crisis is slowly disappearing, paving the way for new demand.

During an appearance on CNBC on Monday morning, Buffett said he would buy up millions of U.S. homes if it were possible.

Data out Monday seemed to support Buffett’s contention. The National Association of REALTORS® announced that the number of people buying used homes in January rose to a 21-month high.

As usual, the annual letter was an opportunity for Buffett to provide a candid assessment of Berkshire Hathaway’s wins and losses, most of which were in the volatile energy sector. He said his entire $2 billion investment in a Texas utility company may be wiped out unless natural gas prices rise substantially.

“In tennis parlance, this was a major unforced error by your chairman,” he wrote.

Buffett also used the letter to reveal that he has chosen a CEO to succeed him at Berkshire Hathaway—he just refused to provide the identity of that person.

Source: RISMedia

About Sutton Lipman

Sutton Lipman Costanza is a native Nashvillian and a second generation REALTOR. She is excited and proud to be a part of The Lipman Group Sotheby’s International Realty team. Sutton graduated with a Bachelor of Arts degree from The George Washington University. Before selling real estate, she worked at Centerstone, a community-based behavioral health care organization in Nashville. In her free time, Sutton enjoys spending time with her family and friends, traveling, practicing Spanish, knitting and playing tennis. sutton.lipman@sothebysrealty.com or 615.438.6149
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