Warren Buffett Just Made a Huge Bet on the US Housing Market

Perhaps the most bullish indicator for U.S. housing is Warren Buffett.

The legendary investor has been buying up real-estate brokerages around the country as he bets on a housing turnaround. Now, he is partnering with Brookfield Asset Management, a Canadian real-estate investor, to more than double the size of his brokerage business.

Bloomberg Businessweek's Noah Buhayar has the details:

Berkshire’s HomeServices of America Inc. unit will be the majority owner of the venture to manage a U.S. residential real-estate affiliate network, according to a statement on the new company’s website. The firms plan to offer a new franchise brand, Berkshire Hathaway Home Services, starting next year. Brookfield’s network has operated under the Prudential Real Estate and Real Living Real Estate brands.

Berkshire’s managers have been positioning the firm to benefit as the U.S. home market recovers from its worst slump in seven decades. The Omaha, Nebraska-based company has bought a brickmaker, won the loan portfolio of bankrupt mortgage lender Residential Capital LLC at auction and built its HomeServices unit by agreeing to acquire real-estate brokerages in states including Oregon and Connecticut.

The press release says the brokerages that will make up the new company did a combined $72 billion in sales in 2011. That's more than twice the $32 billion in sales that Berkshire did in 2011 without the new brokerages.

More from the release:

The combined networks of more than 53,000 Prudential Real Estate and Real Living Real Estate agents generated in excess of $72 billion in residential real estate sales volume in 2011, and operate across more than 1,700 U.S. locations.

“Berkshire Hathaway HomeServices is a new franchise brand built upon the financial strength and leadership of Brookfield and HomeServices,” said Warren Buffett, chairman and CEO of Berkshire Hathaway Inc. “I am confident that these partners will deliver value to the residential real estate industry, and I am pleased to have Berkshire Hathaway be a part of the new brand.”
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“The strength of the Berkshire Hathaway name, coupled with the operational excellence of HomeServices and the franchising experience of Brookfield, positions Berkshire Hathaway HomeServices^® as a leading real estate franchise in the U.S., building on our traditions of exceptional client service and innovation. Brookfield is excited to be a partner in creating a home for the best real estate brokers and agents in the country,” said Bruce Flatt, Brookfield Asset Management CEO.

Buffett has been public about his bullish housing call for a while as he's built his residential real-estate brokerage business, but this is a big addition.

Read more: http://www.businessinsider.com/warren-buffett-brookfield-asset-managment-housing-2012-10#ixzz2CggkFeYf

"Invest in Homes Today"- Warren Buffet

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The news spread like wildfire.  No, it’s not another politician’s sex scandal or the latest (definitely not greatest) gas prices.  It is the monumental statement made by Warren Buffett that he would buy up “a couple hundred thousand” single-family homes.  The catch is that he would do that if it were something he could practically manage. He may not be able to practically manage it but individuals certainly can.

Think about that.  For months, if not more than that, countless Realtors have been urging their clients and potential clients that now is the perfect time to buy.  Now that it comes from one of the biggest investors of our time, it brings new light to the subject for many investors and has generated widespread industry buzz from the moment the billionaire uttered those words.

In an interview where he discussed several topics, soon into the discussion with Becky Quick of CNBC’s Squawk Box, he said that in addition to equities, single-family homes are probably the most attractive investment there is out there right now.  With the low rates that seem to be heading further down still, he suggests buying at these low interest rates and then for homeowners to refinance if and when the rates dip even more. 

He cited that the only reason he has not purchased as many homes as he would have liked is because of the practicality of managing the transactions and properties.  Apartment units might have been more manageable and in his words, he said he would “load up on them” had that been the case. But for the everyday investor it makes perfect sense to seize this opportunity and Warren Buffett highlights this repeatedly in his most recent discussion on CNBC.

Mr. Buffett shared his perspective on the idea of buying homes at distressed prices, fixing them up and renting them out as an ideal way to get a solid return on investment.  Referring to the changing trends and attitudes within the housing market, he also said this is the perfect way to “short the dollar” because with a 30-year fixed rate mortgage it can go two ways; either the interest rate is too high down the line after which you can go and refinance or if it’s too low the other guy’s stuck with it for 30 years.  Could this be the return of the house-flipping craze that we saw boom in the mid 2000s?

Mr. Buffett’s statement brings new light to something that so many agents and mortgage consultants have been saying all along.  Buy now.  At a time when stocks are just now rebounding after four years of inching their way back up, he says that consumers should acquire 30-year fixed rate mortgages and then refinance when rates go down further. 

If homeowners can hold on to their property for a long time after purchasing it at the lowest rates the industry has to offer they are sitting on the best investment possible of our time.  Of course equities are still very strong but they have come up quite a bit and Warren Buffett says owning a home is a “leveraged way of owning a very cheap asset”, making it quite possibly the most attractive investment that you can make.

Greater Pennsylvania Real Estate Market Update – October 2012

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Thank you for visiting my blog! Today, I want to share with you some important statistics that help to show the condition of our marketplace as we head into the cooler months of the year.

Right now we have 3,568 homes on the market for sale and in an average month the number of homes being sold is 411. That is a great number! Amounting to just under 14 homes sold each day on average, this is a good indicator of strengthened consumer confidence – particularly in the housing market.
For an in-depth look at these stats, Click Here >>

Now, these sales could be because of the Presidential election as many speculate, however in my experience I would say it has a lot more to do with the record setting low interest rates we are seeing in the industry these days. With the government not doing much to raise the base rate, we can expect for at least a little while longer, for these interest rates to hover at these amazing lows.

Inventory levels have come down from 10 months’ of supply last year at this time to 8 months this year. What this means is that if no new properties were to come on the market, it would take 8 months to sell all the homes that are currently available.

On a countywide scale, our average number of Days On Market is currently at 97 days. If you look at my listings alone, the average number of Days On Market is just 59 days – meaning that I am selling homes faster.
A more detailed explanation can be found by Clicking Here >>

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What does all this mean to you as a buyer or seller?

For sellers, clearly this is a great time to list your home. With inventory moving down and demand increasing sellers are enjoying much more success than they have had over the past several years.

Times are not tough for buyers either as they are still able to lock in amazing interest rates on 30-year fixed loans and even better on 15-year notes.

If you would like to explore your options, discuss your real estate needs or even just inquire about real estate in general – I invite you to contact me today.

Debbie@PaDreamHomes.com

215-757-6100

215-750-3036