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Buffet Ready For the Next Housing and Mortgage Trend

August 2, 2012 Leave a comment
— Photo Courtesy of CNN.com —

The U.S. housing market has seen four years of  lack of new homes.  Since 2008 new homes construction declined  steadily and it was  only up until this  past June 2012 we began to see reports of  new housing  construction applications  increase.

Four years of lack of  new homes coupled with the shadow and REO  inventory held by the banks  and the  foreclosure homes many stuck in limbo because of the robo signing issues only recently starting to move again;   the  shortage of  available housing has been substantial.

These issue skew the reports of increase of home prices as a barometer for uptrend in the housing market. The demand for homes because of loss of inventory  may not reflect as much of an  uptrend in   the housing market, rather  leaning more towards  competitive bidding  for the minimum inventory on market.

What  may be  added  to that demand is  the normal new   families demographic  but those numbers are balanced out by the number of young adults remaining at home because of the unemployment.  When the unemployment numbers decrease there will added factor in housing demand.

Warren Buffet’s Berkshire Hathaways   increased his holdings in Wells Fargo, the largest U.S. Homelender, and the assets of the bankrupt Residential Captial LLC.

A turn in the housing market will benefit Berkshire’s businesses tied to home building and repair, said Josh Brown, who helps oversee $350 million at Fusion Analytics Investment Partners LLC in New York, including Berkshire shares.

“Buffett has spent the past decade amassing a portfolio of companies that are involved with home remodeling,” he said in a phone interview. “It’s got the right drivers if this housing trend continues.”

Berkshire Hathaway  has added approximately 36% or  104.1 million shares of Wells Fargo to its portfolio since  2008-2009.   And his choice in a regional bank is a less riskier  one  with current big bank problems.

“Wells is seen as a supersize regional bank,” reports Wall Street Journal.”More telling, it isn’t a player in over-the-counter derivatives markets. Wells had derivatives with a face value of about $3.2 trillion at the end of last year. J.P. Morgan had $71 trillion and BofA, $68 trillion.”

When the real estate market is back on the move Warren Buffet will in the right position, again.

 

ADDITIONAL READING

Investing in Real Estate

Home Buying Kit For Dummies

Cash Flow Notes 2012

Finally! Strongest Housing Starts Since 2008

— Photo Courtesy of http://www.yc.edu



Outlook for residential real estate is on the uptrend and will push the economy in the right direction  as data indicates that  U.S. home starts in June was one of the fastest pace in almost 4 years according to economists.

Seventy-nine economist surveyed by Bloomberg News  provided the data that indicates housing starts moved up 5.2 percent last month to 745,000 estimated annual which is the  strongest since 2008   according to the median estimates, and building permits.

“The long-awaited housing market recovery is definitely under way as demand is improving,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “Continued growth in the number of households, pent-up demand, very low prices and mortgage rates that have resulted in record- high affordability” are underpinning demand, he said.

Confidence among U.S. homebuilders climbed in July by the most since September 2002.
Index of sentiment increased by 6 points to 35 this month as sales and buyer traffic improved according to a report from the  National Association of Home Builders/Wells Fargo.

“As we start to move prices up, it starts to draw people off the sidelines who are potential homebuyers, people that are at the age they should be buying a house, but they’ve been concerned about a further decline in prices,” Daniel Fulton, chairman and chief executive officer of forest-products company Weyerhaeuser Co. (WY), said at a June 13 conference. “So we’re starting to see some increase in activity.”

The housing supply is moving as record low mortgage rates and lower property values attract buyers reducing the inventory.  This will cause the home builders to boost construction which will create jobs and stimulate the economy.

The Standard & Poor’s Supercomposite Homebuilding Index, which includes D.R. Horton Inc. and PulteGroup Inc., has climbed 52 percent this year, outpacing an 8.4 percent gain in the broader S&P 500 Index.

“Evidence from the field suggests that the ‘for sale’ housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process,” Stuart Miller, chief executive officer at Lennar Corp., the third-largest U.S. homebuilder by revenue, said in a June 27 statement.

ADDITIONAL READING

Investing in Real Estate

Home Buying Kit For Dummies

Cash Flow Notes 2012