Warren Buffett Bullish on Housing

Warren Buffett, the billionaire investor and Berkshire Hathaway CEO, said on CNBC’s “Squawk Box” recently that he’d “buy up a couple hundred thousand” single-family homes if it was practical.

Buffett said that’s because he believes purchasing a home with ultra-low mortgage rates and holding it for the long-term has become a better investment than stocks right now.

“Housing will come back, you can be sure of that,” Buffett wrote in his annual letter to shareholders recently.

Buffett forecasts an increase in household formations, as more people who moved in with their parents or family members during the recession look to move out and get their own home soon.

“People may postpone hitching up during uncertain times, but eventually hormones take over. And while ‘doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure,” Buffett said.

Buffett said the recovery in the housing market could vary quite a bit among local housing markets, however. He did not provide a timeline of when he expected a full housing recovery, admitting that his prediction last year that a housing recovery will take shape within the year turned out to be “dead wrong.”

The national median existing-home price³ for all housing types was $154,700 in January, down 2.0 percent from January 2011. Distressed homes⁴ – foreclosures and short sales which sell at deep discounts – accounted for 35 percent of January sales (22 percent were foreclosures and 13 percent were short sales), up from 32 percent in December; they were 37 percent in January 2011.

“Home buyers over the past three years have had some of the lowest default rates in history,” Yun said. “Entering the market at a low point and buying at discounted prices have greatly helped in that success.”

All-cash sales were unchanged at 31 percent in January; they were 32 percent in January 2011. Investors account for the bulk of cash transactions.

Investors purchased 23 percent of homes in January, up from 21 percent in December; they were 23 percent in January 2011. First-time buyers rose to 33 percent of transactions in January from 31 percent in December; they were 29 percent in January 2011.

Forty-seven percent of NAR members report that contracts settled on time in January; 21 percent had delays and 33 percent experienced contract failures. Contract cancellations are unchanged from December but were only 9 percent in January 2011; they are caused largely by declined mortgage applications and failures in loan underwriting from appraisals coming in below the negotiated price.

Single-family home sales rose 3.8 percent to a seasonally adjusted annual rate of 4.05 million in January from 3.90 million in December, and are 2.3 percent above the 3.96 million-unit pace a year ago. The median existing single-family home price was $154,400 in January, down 2.6 percent from January 2011.

Existing condominium and co-op sales increased 8.3 percent to a seasonally adjusted annual rate of 520,000 in January from 480,000 in December but are 10.3 percent lower than the 580,000-unit level in January 2011. The median existing condo price was $156,600 in January, up 2.0 percent from a year ago.

Regionally, existing-home sales in the Northeast rose 3.4 percent to an annual pace of 600,000 in January and are 7.1 percent above a year ago. The median price in the Northeast was $225,700, which is 4.2 percent below January 2011.

Existing-home sales in the Midwest increased 1.0 percent in January to a level of 980,000 and are 3.2 percent higher than January 2011. The median price in the Midwest was $122,000, down 3.9 percent from a year ago.

In the South, existing-home sales rose 3.5 percent to an annual level of 1.76 million in January but are unchanged from a year ago. The median price in the South was $134,800, which is 0.3 percent below January 2011.

Existing-home sales in the West jumped 8.8 percent to an annual pace of 1.23 million in January but are 3.1 percent below a spike in January 2011. The median price in the West was $187,100, down 1.8 percent from a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

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