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Warren Buffett extends his bet on housing

07-Jul-2017


Natasha Rausch and Katherine Chiglinsky, Bloomberg

Clayton Homes, the unit at Warren Buffett’s Berkshire Hathaway Inc. that assembles houses in factories for delivery to lots, bought Colorado’s Oakwood Homes to expand a push in site-built construction.

The deal includes about 18,000 lots controlled by the developer, Clayton said Thursday in a statement that didn’t disclose terms. That’s the largest figure in deals disclosed by the homebuilder, which added 1,200 in a Missouri transaction and fewer than 4,000 through a Tennessee agreement last year.

Buffett has positioned Berkshire to benefit from demand for housing. His Omaha, Nebraska-based company has divisions that make bricks, carpet and paint, and he’s invested in mortgage lenders. The billionaire was premature in calling a recovery from the 2008 crash, but has long insisted that a rebound is inevitable, given the rising U.S. population.

“Homebuilding will be the best in this year, in my view, since things went to hell in 2008,” Buffett told CNBC in May, according to a transcript posted by the business news station. “It’s a lot better than it was three or four years ago.”

U.S. homebuilders are benefiting from job growth, consumer optimism and supplies of existing houses that are near record lows. Sales of new single-family homes rose 2.9 percent in May from the previous month, government data show.

Clayton generates more revenue per home in its new businesses than by assembling houses in factories, Buffett told shareholders in a February letter. He predicted the site-built properties will account for 14 percent of dollar volume this year and just 3 percent of unit sales.

Oakwood sold 1,200 homes last year, an increase of 20 percent from 2015, according to the statement. The company, which was founded in 1991, is the largest privately held homebuilder and community developer in Colorado, and also operates in Utah, Clayton said.

Buffett predicted in early 2010 that a rebound would probably occur in a year or so, which proved optimistic. Then in 2011, he wrote that buying a home was the third-best investment he ever made, after the rings he bought for his first wife, Susan Thompson, and, after her death, his second wife, Astrid Menks. In that letter, he reiterated his long-term confidence in the market.

“A housing recovery will probably begin within a year or so,” Buffett wrote at the time. “In any event, it is certain to occur at some point.”


Bloomberg
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