Warren Buffett, CEO of Berkshire Hathaway, said yesterday on CNBC’s “Squawk Box” that buying single-family homes is such a great investment right now, if it were practical, he’d buy a couple hundred thousand of them. Given how low rates are for a 30-year fixed-rate mortgages (3.95 percent, according to the Freddie Mac Mortgage Index), Buffett told CNBC’s Becky Quick that homes, held over the long term, provide a better investment than stocks. If you factor in that prices in some areas are at a 10-year low and inventory levels are high, the conditions are ideal for buying.
When asked if he was a young individual investor at home and have a choice between buying his first home or investing in stock, where would he tell someone is the better bet?
Warren: "Well, if I thought I was going to live, if I knew where I was going to want to live for the next 5-10 years I would buy a home and I'd finance it with a 30-year mortgage, and it's a terrific deal. And if I literally was an investor that was a handy type, which I'm not, and I could buy a couple of them at distressed prices and find renters, I think that's, and again take a 30-year mortgage, it's a way of owning a very cheap asset now and I think that's probably as an attractive an investment as you can make now."
Warren: "Well, if I thought I was going to live, if I knew where I was going to want to live for the next 5-10 years I would buy a home and I'd finance it with a 30-year mortgage, and it's a terrific deal. And if I literally was an investor that was a handy type, which I'm not, and I could buy a couple of them at distressed prices and find renters, I think that's, and again take a 30-year mortgage, it's a way of owning a very cheap asset now and I think that's probably as an attractive an investment as you can make now."
While the “Omaha Oracle” has been right about a lot of investments, his opinion on housing hasn’t always been on the mark. At last year’s annual Berkshire Hathaway meeting, he said 2011 was going to be the year that housing prices were going to rebound. In a letter to his shareholders sent last weekend, he apologized for being “dead wrong.” He explained his belief that housing is a sound investment at least in part the inventory of new homes isn’t growing at a rate that will satisfy future demand. People living with their in-laws to save money, he quipped, will find that attractive for only so long.
You have to give Buffett credit for putting his money where his mouth is. Home Services of America Inc., a Berkshire Hathaway Affiliate, is one of the largest independent residential real estate and settlement servicing companies in the U.S. While Buffett wouldn’t comment completely on Berkshire Hathaway’s stake with each of the banks, the fund actively invests in them. He says if he could own only one bank stock right now, it would be Wells Fargo.
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