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Warren Buffett’s Latest Investments Show He’s Betting Big on the Housing Market4 MIN READ

December 29, 2023

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When you’re not only one of the richest men in the world, but one with an investing track record that’s produced billions of dollars, the world takes notice.

When you’re not only one of the richest men in the world, but one with an investing track record that’s produced billions of dollars, the world takes notice. So it is no surprise that economic experts are paying attention to Warren Buffet’s investing firm, Berkshire Hathaway’s, recent move: investing in the housing market.

Or that’s one way to interpret the firm’s purchase of more than $700 million in DR Horton stock in the spring, as well as another $100 million in Lennar Corp. and NVR Corp. Berkshire Hathaway now owns almost 6 million DR Horton shares, 152,572 Lennar shares and 11,112 NVR shares.

DR Horton is considered the largest homebuilder in the United States, at least by volume. This company builds a variety of homes in “desirable locations,” as its website states, for everyone from first time homebuyers to luxury home owners.

It’s a little bit difficult to determine if this purchase was specifically directed by Buffett or by one of his other investment managers, AP News reported. However, since Buffett is largely responsible for handling the biggest investments in the firm, given the size of the investment — around $800 million — it seems likely Buffett was the one calling the shots on this, which may bode well for the housing market.

What Does This Mean for the Housing Market?

Though experts are mixed on their predictions for what the housing market will do in 2024, DR Horton’s recent revenue report may be a bellwether for a stronger-than-expected year to come.

The company’s fourth quarter revenue was better than expected, suggesting that it will hit the ground strong in 2024.

DR Horton’s chairman, Donald R. Horton, wrote in the company’s revenues report, “Despite continued higher mortgage rates and inflationary pressures, our net sales orders increased 39% from the prior year quarter, as the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”

A Housing Shortage Is Good for Builders

Homebuilder stocks have, in fact, been steadily on the rise this past year, partly due to a slowing of existing home sales, which has increased the demand for new homes to be built. According to Investor’s Business Daily, homebuilder stocks as a group have seen an increase of more than 30% in 2023.

And while Berkshire Hathaway’s nearly 6 million shares of DR Horton may seem like a lot, it actually only represents a 1.76% interest in the company. The continuing housing shortage may only drive these stocks up further in the coming year.

What Does This Mean for Homebuyers?

What’s good for stockholders isn’t always good for the average person. A shortage of homes means that home prices are likely to go up. The Mortgage Banker’s Association predicts they may rise by 4.1%, while lender Fannie Mae suggests it may be a more modest 2.8%. 

The only upside is that the Federal Reserve has suggested it is done raising interest rates, and there are signs that mortgage interest rates will drop, which essentially may translate to not much of an overall shift in the costs of a home.

If you were already in the financial position to purchase a home, the problem won’t be affording one; it will be finding one to purchase.

With Warren Buffett’s financial vote of confidence in homebuilders, however, it hopefully won’t be too long before the housing market returns to a plentiful supply, leveling out home prices.

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