Home > Blogs > Erion Shehaj > Houston Real Estate of the Union

Warren Buffett on the housing market

By Erion Shehaj

Real Estate Broker/Owner with Signature Real Estate TREC# 516948

May 06, 2007 11:56 AM

CNN reports that the so-called Oracle of Omaha, Warren Buffett attended the annual shareholder meeting for his conglomerate, Berkshire Hathaway where he was asked about his opinion on the housing market troubles. He expressed considerable concern about the large amount of no-money-down mortgages outstanding. "The housing market is sick and it's going to stay sick for a couple of years" - he is quoted as saying.

Normally housing stories on CNN and other media outlets can be discounted as blown out of proportion. But when Warren talks... it's a different story.

I would welcome your comments on this.

Comments(5)

Comment

Show All Comments

Sort:

Brian-Logan Reid

Nantucket, MA

Former Associate Broker, Realtor

While I have the utmost respect for Warren Buffet, his extensive and obviously profitable investment experience, and his unique insights, no one knows everything about everything and one should not extrapolate that his vast business experience spills over into knowledge about the housing markets across the country.

Again, to reiterate YET AGAIN, all real estate is LOCAL! There is NO national housing market - some places in Florida, California and Nevada are falling through the floor...others (particularly in the mid-west and other places essentially away from the coasts) are doing just fine. So unlike the stock market (which is extremely liquid and where profits or losses can occur instantaneously), the real estate markets, being illiquid, take much more time to sort out and 'stablize'. I agree with W.B. that there is a lot of bad stuff going on in the RE markets and it is going to take some time for all of it to work itself out. I just read today in the NYT's that the low-medium end of the Miami condo market is in the crapper - rising inventories and falling prices AND there are 8,000 condos coming on the market AND 12,000 schuduled to come on by the end of 2008!!! I would safely say they are F***ED.

All that being said, I DO understand, though, that both national and international economic factors do have an effect on housing markets. With this in mind, I value W.B.'s stance.

There was an interesting comment that I read (that I cannot recall verbatim) that goes something like this...everyone is trying to call the 'bottom' of the real estate market. When the stock market was crashing, everyone was also trying to call the bottom. In reality, the bottom appears when NO ONE needs to 'call' the bottom - EVERYONE knows it. What I take away from that, then, is so long as people are still trying to 'call' the bottom...we're not there yet...

May 06, 2007 12:27 PM

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham

Bank of England (NMLS#418481) - Raleigh, NC

Bob Mitchell (NMLS#1046286)

Great post and even better comment Brian! I have to say that I disagree with Mr.Buffett in a sense. If you are viewing real estate as simply an investment and looking for double digit returns, then yes. It will probably not come back to that anytime in the near future. However, if you look at real estate as a long term hold, which I think is the way that it should be viewed, then real estate is an excellent investment. Buying now is the equivalent to "buying on the dip" in the stock market.

The fundamentals are there for houses to continue appreciating long term. Housing formations are still up and the population is still growing. These folks are going to need places to live.

Bob Mitchell

ValueList Real Estate Services, Inc.

May 06, 2007 12:56 PM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Nothing new there. I don't believe that my market in Maryland and Northern Virginia will recover until prices come down 20% or interest rates come down 15%. Until then, our market is the worst it's been in 20 years.

May 06, 2007 01:16 PM

Dave Cheatham

INC Financial - Bartlett, IL

I do not believe the problem is the 100% buying issue. It is the fact that people got into these loans when they should not have. When LO's did things to line their pockets instead of truly looking out for the client.

This is one are that I think people are not looking at the real issues at hand.

I do think the market will be off for a couple years. This is the time frame it will take for people to realize that we should not be % rate driven, but instead payment driven for the life of a loan.

May 06, 2007 01:21 PM

Beth Bastian

Rosemont Financial Inc - Simi Valley, CA

Simi Valley Real Estate

Hold up Dave, the LO's are not the only people to blame. As a loan officer I would turn down a client, only to have the Realtor take the client to another loan officer.

May 06, 2007 01:26 PM