Although he admitted that Berkshire Hathaway’s home construction businesses struggled in 2010, Warren Buffet, chairman of the company, predicted that a housing recovery could begin within a year or, at least, “it is certain to occur at some point”. Buffet pointed out that the company’s home construction businesses were still in their same competitive positions in the industry, but allowed that “their profits are far below the levels of a year ago.” While the country waits on the housing recovery – which Buffet clearly anticipates, though not with much specificity – the chairman is preparing Berkshire Hathaway “with capital investment,” including spending $200 million on plants and equipment for Shaw Industries (carpet), “all of it situated in America.”
Lately, Buffet has been making waves as he “bets” on a housing market recovery by putting his money, literally, where his mouth is. He recently acquired an Alabama brick manufacturer and began construction on a roofing plant in Ohio that will run him about $55 million. In his letter, he emphasized common sense in future housing market regulation, saying “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.” Buffet accuses “government guarantees” of facilitating this “nightmare…fantasy” in the past and recommends against a future home ownership process that relies on the government for support.
What, if anything, do you think that Warren Buffet’s letter and predictions should mean to the housing market and to real estate investors?
Thank you for reading the Bryan Ellis Real Estate Letter.
Your comments and questions are welcomed below.