Buffett Sees Signs of Stabilization in Housing Markets

Speaking at the Berkshire Hathaway (BRK-a) (BRK-b) annual shareholders meeting on Saturday, which was expected to draw an estimated 35,000 shareholders, Warren Buffett said (after announcing Berkshire’s Q1’09 operating profit fell about 12% on a Y/Y basis) that he sees some signs of stabilization in housing markets.

From MarketWatch: In the last few months you’ve seen a real pickup in activity although at much lower prices…We see something close to stability at these much-reduced prices in the medium to lower part of the market,” Buffett said, citing data from Berkshire’s real estate brokerage business, which is one of the largest in the U.S.

Roughly 1.3 million households are created each year in the U.S., while about two million homes were being built a year during the recent boom, Buffett added.

At that rate, “you will run into trouble,” he said.

Now housing starts are running at roughly 500,000 units a year, which means the excess inventory is being absorbed at a rate of about 700,000 to 800,000 units a year, Buffett said.

“We’re going to eat up inventory. That may take a couple of years. When it gets done you will have stabilization in housing prices,” Buffett predicted. “Then you will have demand for more housing starts.”

Certainly hearing arguably the world’s most successful investor talk positively about the housing market is encouraging. However, Buffett’s comments seem a bit contradictory in the sense that in the headline he sees signs of stabilization in housing ; then later on he says “housing market to stabilize in a couple of years”?!

Also today, in a Bloomberg Television interview before the Omaha, Nebraska-based company’s annual shareholder meeting, Buffett said  he’s seen no indication of recovery from the real estate slump that helped cause the U.S. recession.”

From Bloomberg: “There’s no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing,” said Buffett, “You never know for sure, even if there’s a leveling off, which way the next move will be.”

Nice spin.

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