In 2010, Berkshire Hathaway CEO said that reducing new housing starts would help lay the foundation for a more balanced market in the future. His own company’s recent investments in homebuilders demonstrate a commitment to this principle.
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Berkshire Hathaway CEO Warren Buffett knows a thing or two about the real estate market.
The investor and philanthropist shared one of his tips for determining market health during a conference. 2010 Berkshire Hathaway Annual Shareholders Meetingstill relevant today, Yahoo!finance pointed out in a recent column. Buffett said at the time that falling housing starts might actually mean the market was moving in the right direction.
“You want to get a bad number for a while,” the CEO said. “The only way to clear excess inventory is for demand to be greater than supply for a period of time.”
In other words, fewer housing starts could help set the stage for a more balanced market in the future.
In 2023, as rising mortgage rates slowed the market, Berkshire Hathaway acquired stakes in three major builders including DR Horton Inc., NVR Inc. and Lennar Corp., with investments totaling nearly $800 million. The move validates the company’s long-term bet on market resilience despite the current challenging circumstances.
Now, in 2024, Berkshire Hathaway’s bet appears to have been made in the right direction. Inventory, affordability and mortgage rates continue to face challenges, but economists have begun to express optimism.
Realtor.com expects the market to become more favorable to renters and buyers next year. Real estate market forecast for 2024. The real estate company expects home prices to fall 1.7% and mortgage rates to fall to an average of 6.8%, falling slightly to 6.5% by the end of 2024.
Meanwhile, Realtor.com expects rents to drop 0.2%, providing some relief to renters’ wallets.
Existing housing inventory is expected to decline by 14% annually, with many homeowners still reluctant to give up ultra-low mortgage rates during the pandemic. However, as new construction and rental supply gradually enter the market, a more balanced housing landscape should begin to take shape.
Buffett’s advice and his own company’s actions have shown time and time again that real estate is a stable investment. Those who invest for the long term will ultimately receive positive returns that reflect the real estate market’s growth potential.
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