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Warren Buffett Shows His Faith in Housing

Friday - 4/19/2013, 2:58pm  ET

When Warren Buffett declared that housing was on the rebound last summer, he immediately put his money where his mouth is. His company, Berkshire Hathaway partnered with Brookfield Asset Management to create HomeServices of America last fall, which has been busily scooping up real estate brokerages -- and recently revealed its new logo as the rebranded Berkshire Hathaway HomeServices.

Gobbling up brokerages left and right
The new entity is gearing up to be a national, full-service real estate company and has incorporated its formerly separate Prudential Real Estate and Real Living brands under the new umbrella. The complete unveiling of the new company will continue throughout this year.

Meanwhile, BHHS has been acquiring other real estate companies to extend its reach, adding to purchases it had made early last year of Prudential realty brokerages in Oregon and Georgia. So far this year, it has purchased a large brokerage in California, Guarantee Real Estate, based in Fresno, as well as Prudential Gaslight Realtors near Kansas City, Missouri, in January. The Guarantee acquisition added 400 agents to its base of 53,000, and the purchase of Prudential Georgia Realty in March added another 1,000 salespersons to the company's roster.

Other housing bets
Despite admitting being "dead wrong" about a quick turnaround in housing, Buffett knows that the sector won't stay in the dumps forever. Berkshire's portfolio holds other housing investments, such as Benjamin Moore paints, Shaw Carpet, and Acme Brick. Clayton Homes, a manufactured home company owned by Berkshire, saw production jump 13.5% last year over the previous year's output.

While it's certainly true that housing has improved over the past year, it is still far from recovered. But rebounding home prices and values are a reality, and a slew of economists queried by Bloomberg recently agreed that the March new home construction rate would surpass that of February by an annualized rate of at least 23,000 units. In fact, numbers released by the Census Bureau reflected over 1 million housing starts, compared with the analysts' estimates of 930,000 -- the highest in nearly five years.

Time will tell if these numbers are sustainable. However, Buffett is right when he notes that housing will eventually become viable again. Thanks to his insight, the Oracle's company will be ready and waiting to take its share of the profits when that day comes.

Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!

This article was originally published as Warren Buffett Shows His Faith in Housingon Fool.com

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