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Warren Buffett Bets Billions on Housing

July 2, 2012

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When it comes to the housing market, the recovery is on the horizon, at least according Warren Buffett, the CEO of Berkshire Hathaway.  Last month Berkshire announced plans to bid 3.85 billion dollars to acquire Residential Capital LLC, a Detroit based mortgage company.

 

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Warren Buffett, CEO of Berkshire Hathaway, has bid $3.85 billion on Residential Capital, a mortgage company. Buffett has been expressing optimism about a housing recovery for months.

 

         The bid by Berkshire is one of several indications that the company is optimistically preparing for the housing market to rebound. Berkshire recently acquired a brickmaker and expanded its real estate brokerage and wagers on commercial real estate, forming a venture called Berkadia Commercial Mortgage LLC.

 

       Mr. Buffett has shared his predictions that the market will soon regain strength for months. During a CNBC interview in February, he said, “ If I had a way of buying a couple hundred thousand single-family homes and had a way of managing them… I would load up on them”, emphasizing the opportunity presented by historically low interest rates available on loans. That same month, in a letter to share holders, Buffett wrote, “Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over”, further explaining his confidence that the market would soon recover.

         Recent data seems to confirm Mr. Buffet’s predictions that there has been a shift in the real estate market.  According to RealtyTrac Inc., foreclosure filings in the U.S. have fallen on an annual basis for 20 straight months and home prices jumped 1.8 percent in March, the biggest monthly increase in at least two decades.

         The U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD), reported in June that sales of single family homes jumped 19.8 percent from May 2011 to May 2012. Between April and May, new home sales increased 7.6 percent to a seasonally adjusted 369,000-unit annual rate, hitting a two year high, beating forecasts for the month. The last time sales were this high was the spring of 2010.

          Reports also indicate that record low mortgage rates and shrinking inventory are leading to increased demand.

         While it may be too soon to celebrate, the predictions of Mr. Buffett, known as the “Oracle of Omaha”, may indicate that sunny days are ahead for the real estate market.

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About century21affiliatedchicago

Century 21 Affiliated-Chicago (“C21AC”) is a full service real estate brokerage firm located in Chicago with a focus on residential and commercial properties. Our agent base and management team includes a wide range of specialties serving customer needs across the ever changing real estate landscape, with expertise in many niches, including REO transactions, investment sales, bulk purchasers and sellers, commercial product and traditional residential transactions. C21AC is part of Century 21 Affiliated (“Affiliated”), a top 5 franchisee in the Century 21 system with over 30 locations across the Midwest and over 32 years of history. C21AC entered the Chicago market in February 2011 to re-launch the Century 21 brand in the downtown area and to bring a proven operating platform to the large and fragmented Chicago real estate market. At Century 21 Affiliated, the customer comes first. Our complete commitment to delivering top-notch customer service to our clients is what distinguishes us from our competitors and makes us such a powerful force in the real estate industry. Specialties Residential Sales, Commercial Sales, Short Sales, Bulk Sales, REO's, Leasing, Business Services

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