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Warren Buffett Is Betting Big On Housing

Categories: Uncategorized | Posted: March 11, 2012

By Nathaniel Popper Los Angeles Times

NEW YORK — 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 last 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 depressed because young Americans have stayed at home rather than leaving their parents to set setting up their own households.

“People may postpone hitching up during uncertain times, but eventually hormones take over,” Buffett wrote in the letter to the 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 homebuilders are not creating enough new supply. As a result, the excess housing inventory that built up after the financial crisis is slowly disappearing, paving the way for new demand.

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

New data seemed to support Buffett’s contention. The National Association of Realtors reported that the number of people buying used homes in January rose to a 21-month high.

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