Recently, Warren Buffet made public his annual shareholders letter where he admitted to being “dead wrong” when he predicted last year that housing prices would rebound within the year. However, he’s not betting against the market this year, even going as far to say that real estate is such a good bet that he’d “buy a couple hundred thousand homes” himself. He also had some interesting theories on why young people have been slow to buy and what will eventually make all the difference… hormones (among other things). We like Buffet’s candor and his wisdom.
Here is an excerpt from his letter:
Housing will come back – you can be sure of that. Over time, the number of housing units necessarily matches the number of households (after allowing for a normal level of vacancies). For a period of years prior to 2008, however, America added more housing units than households. Inevitably, we ended up with far too many units and the bubble popped with a violence that shook the entire economy. That created still another problem for housing: Early in a recession, household formations slow, and in 2009 the decrease was dramatic.
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.
Click HERE for video, a more detailed recap in regards to housing, a link to Buffett’s full letter to shareholders.