Warren Buffett Predicts A Housing Recovery

Warren Buffett Predicts A Housing Recovery

Billionaire Warren Buffett is like the Orville Redenbacher of investing: a gray-haired old man with a salt-of-the-earth image. But he’s also widely regarded as one of the sharpest business minds in America, with the wealth to prove it (he’s the second-richest man in the country, behind Bill Gates). So, it was good news for real estate when he predicted a recovery from the real estate crash last week.

“Housing Recovery Within A Year.”

“A housing recovery,” Buffett wrote in the annual letter to shareholders of Berkshire Hathaway, the mega-company he runs, “will probably begin within a year or so. In any event, it is certain to occur at some point.” He went on to say that the housing-related businesses his company owns, such as carpet manufacturers, are acquiring plants and spending money on equipment.

Demand Is Catching Up With Supply.

“Homeownership makes sense for most Americans,” Buffett wrote, “particularly at today’s lower prices and bargain interest rates.” Our friends at the investing site Motley Fool give a little more background: Since there are about half a million new housing units being created every year and about a million new households being formed every year, “demand is catching up with supply.”

Practicing What He Preaches.

The question that always runs through my mind whenever anyone is pro-real estate is, do they own a house? Well, famously, Buffett has owned the same house in Omaha for 52 years. He refers to his house as the “third best investment I ever made” (the top two, he says, were wedding rings).

So, if you’re contemplating a home purchase, realize that you have one of the great financial minds in America on your side. Just keep in mind two more Buffett quotes:

Mind Your Eyes And Your Wallet.

First, Buffett notes that a buyer can get in trouble when his or her eyes are “bigger than his wallet.” Buffett reminds prospective homeowners to buy only house that they can afford, rather than overextending to buy a dream house.

The second pointer to remember is that renting is okay, too. Although Buffett writes that his home purchase gave him “52 years of terrific memories with more to come,” he goes on to say, “I would have made far more money had I instead rented and used the purchase money to buy stocks.”

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