Warren Buffett Sees A Rebound In The Housing Market Coming

Warren Buffett is predicting that the United States economy will not go through a double dip recession. This will come as a surprise to a lot of economists that are calling for a double dip recession. Buffett boldly predicted a lot of cheery economic news that if it occurs will lead to a full fledged recovery. Buffett discussed his predictions in a full length interview with Bloomberg this past weekend.

Buffett told Bloomberg that he is seeing in demand a lot of different industries in Berkshire’s businesses. The only industry that he sees that is lagging is the construction industry. He believes that things are a lot better economically than the doom and gloom scenario being painted by so many.¬† Buffett sees the start of a recovery in the housing industry in the next year or so. He stated that “we will come back big time on employment when residential construction comes back and that the unemployment rate will drop to 6 percent¬† within a few years .”

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I found Buffett’s comments about the housing market to be the most interesting. I think that it is impossible to pick a market bottom but it is clear that the housing market is somewhere near the bottom. The signs that indicate this to me is how bearish everyone is on the housing market. Nobody wants to invest in real estate now. Pessimism is normally a good sign for a rebound because it washes everyone out and then the market can rebound.

I didn’t buy real estate after 2001 because there were too many people flocking to it. People were quitting their jobs to flip homes and everyone thought it was a get rich quick venture. That was a clear sign that a market correction was coming. Now the exact opposite is occurring. When prosperity is abounding, analysts predict the bullish market will continue forever. When a market has crashed, analysts predict a bear market forever. The best bet is to go against the sentiment of the general public. They are usually wrong.

It is clear that Buffett is incredibly optimistic about the economy and thinks that the best is yet to come.

Photo by: barockschloss

Comments

  1. avatar Money Beagle says:

    Very well said. Let’s face it, can you look five, ten years ahead and expect prices to continue to fall and the market to suck? Maybe in certain spots but probably not as a whole. I think what will happen is that as soon as there becomes a whiff of stability, things will jump up in a hurry as people rush to get back in.

  2. avatar Hunter says:

    I’m really looking forward to a housing recovery. We’re teetering on break-even on our home and I would definitely sleep better if we had some strong equity. Military move coming in 12 months and I hope we have a realistic option of selling without saying goodbye to everything we have invested into this place.

  3. avatar Ginger says:

    I’m actually hoping that we do not have an increase for the next two years so I can buy next duplex and fully rent out our current duplex. This also would allow me to cut down my property taxes a bit.

  4. History always repeats itself. The market will bounce back eventually, and probably sooner than later.

    I’m actually hoping it takes a few years as that gives me time to think about jumping in. I’m currently renting, but always have a thought in the back of my mind about buying.

  5. I hate to say it, but I think it will take a little longer than Buffett thinks to work through the housing supply. There are a lot of foreclosures in the pipeline. Although household formation is picking up, I would expect that it won’t be quite enough to take up supply. Give it another 3-5 years before supply is back to normal. I hope I am wrong.

  6. cashflowmantra,

    I was just reading an article that discusses the current inventory out there. You are right. Scary stuff! I see a lot of predictions calling for more housing price declines and another recession, but these are all predictions. However, you can’t argue with numbers and there seems to be 2-5 years of stock out there. Not good.

    The only thing I can say is that this may be a good thing for me if I decide to buy in.

  7. avatar Eddie Fatoush says:

    Mark – Aside from buying investment property, how do you suggest one invest in this potential recovery? Any construction, development or materials companines tha you like?

    • avatar Mark says:

      I would buy a few of the homebuilders or a homebuilders ETF to take advantage of the long term recovery. I am a fan of steel companies. Steel stocks do well when the economy is booming.

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