Warren Buffet on the USA Housing Market
Berkshire Hathaway
February 25, 2012 | Warren E. Buffett
Warren Buffett makes several key USA housing points in the annual Berkshire Hathaway Shareholder meeting:
- Housing completions have been at record lows.
- There are currently more households being formed than new housing units completed, and this is decreasing the excess supply.
- The excess supply will be “sopped up” at different rates across the country.
- Housing is a key reason for the sluggish economy (not the only reason).
That devastating supply/demand equation is now reversed: Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.
At our current annual pace of 600,000 housing starts – considerably less than the number of new households being formed – buyers and renters are sopping up what’s left of the old oversupply. (This process will run its course at different rates around the country; the supply-demand situation varies widely by locale.) While this healing takes place, however, our housing-related companies sputter, employing only 43,315 people compared to 58,769 in 2006. This hugely important sector of the economy, which includes not only construction but everything that feeds off of it, remains in a depression of its own. I believe this is the major reason a recovery in employment has so severely lagged the steady and substantial comeback we have seen in almost all other sectors of our economy.
