Wednesday, March 03, 2010

Warren Buffett on the housing market

Warren Buffett discusses the prospects for the residential real estate industry in his newly-released letter to Berkshire Hathaway shareholders:
In 2009, [housing] starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news.

People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses.

There were three ways to cure this overhang: (1) blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program; (2) speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers or; (3) reduce new housing starts to a number far below the rate of household formations.

Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.


  1. I don't know what Warren Buffet thinks the "high valued" housing price bracket is but paying $500K for a dilapidated POS that's barely 1200 sq ft isn't what I call "low priced" housing that many families can comfortably afford.

    Tell me Mr. Buffet, how many people do you think are sitting around with $100K cash for a downpayment and $3500/month constant monthly, DEPENDABLE income for the next 15-30 years?

    It's easy to be Mr. Buffet and spew BS about the housing market and its affordability.

  2. Good housing is now down to 125K in my area. Unemployment only 5%. So Noz you just need to think of moving. Oh wait that would mean the Midwest where Warren Buffett lives, his hometown of Omaha. What you call BS we call good conservative common sense and we are reaping the rewards. Have a nice day.

  3. THE MIDWEST!!! Ugh...I guess I could also live like a king in some third-world country, but I choose not too. If you haven't put yourself in position to be able to live comfortably in a desirable locale, perhaps you would be more suited for Warren's Midwest. It's called gentrification.

  4. But the midwest is not the bulls-eye of potential terror attacks. We live good wholesome lives here. I guess if you like paying high property taxes and enjoy the terrific traffic that DC area offers--stay right where you are. We despise those things here. I always feel a little dirtier when I am in DC. Maybe it's the riff-raff and urine that I smell when I am walking on the sidewalk there. You can have your huts that you laughably call your homes. I have seen better places to live in the Jamaican slumbs.

  5. You want dirty? Two words...Okla homa.

  6. This comment has been removed by a blog administrator.

  7. Warren,

    Enjoy the mid-west and the nothing-ness around it. Life's too short to live in such a socially deprived part of the world.

  8. ANON March 03, 2010 9:31 PM

    Tell me: Which part of my post is illogical? The part where you yourself probably won't pay $3500 a month for a home or that you don't have $100K saved up like 99.99% of Americans?

    Please pray tell....perhaps you have billions like Buffet too and talk out of your ass with that much money to throw around as well?

    If so, I'd be happy to have you pay my bills.

  9. This comment has been removed by a blog administrator.

  10. Oh you mean those comments such as prices are still coming down and the economy is getting worse? You mean truths?

    I guess in your world delusional recoveries are commonplace.

    And as always....hiding behind the anon is your MO...

  11. This comment has been removed by a blog administrator.

  12. ANON:March 03, 2010 11:07 PM

    I commend you on at least calling yourself the name you deserve...that much I give you.

    I have to many properties have you snatched up in the past 6 months or so in the immunozone you believe won't go down anymore? Just curious.

  13. There's nothing wrong with living in the Midwest. People who think inside the Washington beltway is the only place worth living have a very distorted view of the world.

    I used to live in Hawaii. I can completely understand if someone thinks Hawaii is the only place worth living. But DC? Give me a break!

  14. Anon - Noz is MY toy, and I did not give you permission to play with it!

  15. This comment has been removed by a blog administrator.

  16. James....

    I never said you have to live in a city like DC...but there are plenty of places that are far better to live in than both DC and the midwest and not have to live out in the boonies.

  17. ANON:March 04, 2010 9:33 AM

    You laughing won't change the current climate of the housing market and economy...regardless of big you think your ego is.

    Since we're all stupid and you know better, I'm sure you know what you're doing.

    You and Partisan should get together soon and buy as many properties in the immunozones as soon as you both will be priced out forever!!!! Hurry!!!!

  18. I understand why some people prefer to live in the midwest, it's cheap livin' for one. Many midwesterners, however, fail to understand why there are so many who pay such a high premium NOT to live in the midwest.

  19. " come here because im not a nice person - I like to poke doomers with sticks, and laugh at all their stupid calls say like Case Shiller DC @ 135."

    What a pathetic existence!

  20. "Anon said...Hey Partisan - didnt you say Case Shiller DC would get down to 155? Hows that one working out for ya???"

    True. So, let me state for the record (also Noz and NonPartisan, pay close attention and see how I blunt this guys criticism), ready...


    There, see how easy that was? I did not burst into flames. The world kept spinning on its axis. The 4 horsemen of the apocalypse didnt appear.

    You guys might want to keep that in mind.

  21. We do and we have.

    I can see how it's a big step for you though since you never do.

  22. Noz - you HAVE??? Are you saying, you have just come flat out on this blog and said...I was wrong???

    Sorry, but I highly doubt that. Still, go find one single post on this blog where you said that and you get the fun of watching me eat crow again.

  23. I don't have to...the proof's in the pudding...if you are so sure of the market you claim is rising out of the ballpark and is immune, you and your bed buddy ANON will do everything in power to claw up whatever you can to buy as much as you can.

    The rest of your ramblings are merely excuses...nothing more. So I suggest unless you want to be continued to be labeled a huge hypocrite...get going and buy more!

  24. Noz - can we get serious for just one second here?

    Forget all that stuff about my "bed buddy ANON" and "buy whatever I can" for one second please - lets stay on the issue - please dude im serious here.

    1. I came out and said I was wrong.

    2. You responded (I think saying in essence), ive admitted I was wrong too.

    3. I replied - I dont think you have, but if you can prove it to me I will eat crow.

    So thats where we are right now. Can you prove it to me, yes or no?

    Please please please give a straight answer. Thanks

  25. You've misunderstood me...I never stated I was wrong....I stated it's the first time you've admitted you're wrong.

    And that's the end of it.

    But I'll re-iterate because it's as serious as it gets...if you are so sure of yourself, actions speak louder than words.

  26. Noz,
    Beg to differ a bit. I don't see the midwest as being that bad - I mean, the whole friggin country is generic now. When I was in La Jolla recently, it had the same stores as bum-fruck Kansas City - just a nicer view and climate. American culture is hanging by a thread - just like the housing market. The cure? The reset button.

  27. Nonpartisan.

    I agree with you 100%.

    When I speak of different places, I should always clarify that I'm talking about places outside the US. I grew up Europe for half my life (almost) and frankly regret having moved to the US to begin with.

    It wasn't my choice at the time but I'm stuck here for now until my family (wife and I) can figure out a way to move and get jobs elsewhere. When I say this to people, some get naturally defensive and remark as to how could I dare say such things about the US. Most haven't seen anything else.

    I agree with you...this country needs a reset button so badly in so many ways it's sad. It's a huge experiment gone terribly wrong and we're at the beginning of the tail end of it IMO.

  28. "Noz said...
    You've misunderstood me...I never stated I was wrong....I stated it's the first time you've admitted you're wrong.

    And that's the end of it"

    Gotcha. You have never said "I was wrong" on this blog. This is what I thought was the case the first instance, but clearly I misunderstood when I thought otherwise. Thanks for clarifying.

  29. Noz and Nonpartisan, I too grew up in Europe and know what you mean about the generic parts of America. The chain stores, the chain restaurants, even the chain houses - part of what my husband derisively calls "McCulture".

    If you are out shopping for something more unique around here, may I suggest parts of what the bulls annoyingly call the immunozone (specifically, parts of Alexandria, & DC, maybe Annapolis)?

    These areas have very old houses with tons of character (older than the US in some cases). The stores & restaurants are by and large independents, no more "chainy" than you would see in any modern city in Europe - plus there are no wal-marts for miles!

    Of all the places ive been in the US, these are some of the most reminds me of home. Oh and dont get me wrong, I love this country very much. Its just after seeing what else is out there - I just know how much better it could be!

  30. Noz, don't listen to these people. Where Pussy resides is an area called Delray. The main road is called Mount Vernon. The begining of this road is nothing but a laundramat, pawn shop, gas stations, Chineses restaurant, some empty stores, check cashing place and some ethnic food stores and a car wash. After you pass that section you come upon a few taco shops and a few restaraunts that offer some outdoor seating--not very pleasant this time of the year and the food is substandard. There is a good cheese shop on the road. And then everyone hangs out at this bar in the back of this restaurant called Evening Star. It holds about 20 people comfortably. Continue down the road and there is an Audi dealership and more gas stations. The houses are comical. Some of them have junk on the front porches and others have plastic deer on the front lawns. The bedrooms are very tiny and the kitchens are small. If you conisder those features character, then it's the place for you. But in all fairness, people from Europe are used to small places. The place is not Lojolla but these granolas think it's heaven mostly because they grew up in somme rural area where they had to drive to everything. Believe me, it's not your dream neighborhood. It's just a place with a few walkable places 5 minutes from DC nothing more.

  31. This comment has been removed by a blog administrator.

  32. Anonymous said...
    "Show me one person who has become rich listening to Warren Buffet and I'll sew my asshole up with a leather cord."

    Charlie Munger

  33. One commenter has had most of his comments deleted for violating the blog comment policy:

    "If you want to hold other commenters accountable for their previous statements on this blog, then at least have the courage to choose a consistent and unique username for yourself (other than 'Anonymous') so you can be held accountable as well. If you make snide remarks towards others, your comment may be deleted. If your comment is offensive or disagreeable in general, your comment may be deleted. If you attempt to hold others accountable for their previous statements while you cowardly hide behind the username 'Anonymous', your comment will definitely be deleted.

    In short, the five seconds you save by not using a unique and consistent username will substantially increase the odds that your comment will be deleted."

  34. James, thanks for getting rid of the little instigator. Those individuals who take pleasure in chastizing others should move along to another blog. This blog is for healthy and respectful discussion of today's housing market and the conditions that affect it. Bye, bye Pussy.

  35. Dont worry Anon - im not going anywhere. See the thing is, you provide me with endless entertainment. I love the way you get so agitated when I push the right button. And I know its coming too - all I gotta do is trot out a few choice comments and poof, you appear - just like shooting fish in a barrel!

    Thank you once again for providing some levity into my otherwise pathetic existence. Have a good weekend :)


  37. What a fitting name THE PUSSY! Well done for getting something right for a change!

  38. People who fight over the Internet and really believe they are making progress are morons all around. Go take a chill pill and rethink it.

    Influence others by being a living example of the person you want them to be. There is no other way to influence people, in a permanent way. That is your goal, right?