Buffet: Housing Woes to be behind us ina year.

People thought it was good news a few years back when housing starts – the supply side of the picture
– were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses. There were three ways to cure this overhang: (1) blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program; (2) speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers or; (3) reduce
new housing starts to a number far below the rate of household formations. Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course,
but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.
http://www.berkshirehathaway.com/2009ar/2009ar.pdf

Barclays backs up Buffet says we have 4-5% more downside
http://www.housingwire.com/2010/02/26/home-prices-will-not-go-up-anytime-soon-say-analysts/

The rate at which home prices are dropping may be slowly coming to a halt across the United States, with analysts at Barclays Capital predicting only a 4 or 5% dip left to go before stabilization. But the rate of appreciation on the back side of that bottoming out is likely to “muddle along for the next few years,” they say in a weekly letter to investors.

But the smoothed-out method, while successful on the supply side, is coming at a cost: “The overhang of distressed inventory is a huge negative technical – it suggests that any price rise will probably be met by increased distressed sales,” say the securitization analysts in their Residential Credit Strategy report.

“Meanwhile, home prices do seem a little cheap, using fundamental metrics like price/rent and price/income ratios, but not extremely so,” they add. “Thus, a meaningful rise in prices would need big changes on both the technical and fundamental fronts.”

"Meanwhile, home prices do seem a little cheap, using fundamental metrics like price/rent and price/income ratios, but not extremely so"

I'm sure he's talking about Manhattan.

Quick, someone call Buffet and tell him that Rhino has a chart that says he is wrong!

So, given NYC is 2 years behind, another 3 years of pain?

Maybe not somewhereelse. Connecticut had some decent numbers.

http://www.hartfordbusiness.com/news12156.html

Sales of Connecticut houses started the year off strong with prices also showing improvement from a year ago, a regional housing survey shows.

There were 1,277 single-family units sold in the state in January, up 19.5 percent from the 1,069 sold the same month in 2009, according to Boston data publisher The Warren Group. It was the fourth straight monthly increase.

Meanwhile, the median price of an existing home climbed 6.2 percent in January to $238,000 from $225,000, Warren Group said.

"Connecticut's housing market has been steadily improving over the last several months. January was the third straight month that sales increased year-over-year by double-digit percentages," said Timothy M. Warren Jr., CEO of the publisher of The Commercial Record. "Still, the big unknown is whether home sales will continue to increase when the homebuyer tax credit expires and the Federal Reserve stops purchasing mortgage-backed securities."

Fairfield County led the state with significant gains in sales volume and prices, Warren said. The county's home sales surged almost 60 percent in January to 352 from 222 a year earlier. The median home price shot up 30 percent to $485,000 from $373,500.

Hartford County was the only area of the state to see prices dip in January. The median home price slipped 4.7 percent to $200,000 from $209,900 in January 2009.

Like single-family home sales, Connecticut condo sales grew in January, Warren Group said. Sales jumped 12.5 percent to 395 from 351 in January 2009, marking four straight months of double-digit percentage increases in year-over-year sales.

The median condo price in January, $185,000, was unchanged from a year earlier.

> Maybe not somewhereelse. Connecticut had some decent numbers.

And Manhattan was how many years behind CT?

So it has been proven - a tool that works for some one else, rents from someone else, doesnt own a thing, has never created a job - somewhereelse - aka EddieWilson, aka nyc10022 - now is telling this board that he is smarter than Warren Buffet!

You also believes that the Republicans didnt cause this mess, and the smae policies that caused this mess are the ones to solve it, and that renting is a financial strategy! Somewhereelse you are truly brilliant!

Wait, the guy who said "mahattan up 15%" right before it went down 25%, who doesn't know the Democrats have had both houses of congress since 2006 (apparently, he doesn't think they have them now either), bragged about his Lake Las Vegas "investment" that since went bankrupt... and is responsible for 99% of the stupidest things ever said on this blog...

... is trying to call someone out?

I love it!

Perfitz, you are a moron. Haven't you figured out that nobody listens to you?

somewhereelse - how many jobs have you created? how many properties have you owned?

How many millions are you worth?

Your answer to all those is ZERO.

but elsewhere is an ivy/stuy alum--of course he's smarter than buffet--and he's very productive--of snippy commentary all over this board

elsewhere=loser

back to work with me

yeah, somewhereelse, and how many jobs has your Shakespearean foot model-actress-cateress-waitress software programming Olympic luge-ing gazillionairess wife created?

alanhart what about you? you are throwing stones - tell us abotu your glass house...

Me I am about to sell my 5th company...finishing up diligence this week.

Go back to NJ you tool

Ahhhhhhh. The number of 'businesses' that I've started as a currency of our contributions to society. 5 is better than 4 better than 3, so 6 is better than 5 and so forth.

Uhhhhhhh. I've got an in law that just cleared $40mm on one company. No longer starts companies, no longer cares to work. Matter of fact I'm trying to help him get a nice boat around the world type of sailboat, right now. So I hope your 5th lemon stand is enough for you to stop filing the incorporation papers in Delaware. Those $500 fees really add up. Flmao

> Your answer to all those is ZERO.

I love it, once again perfitz's "arguments" are reduced to rubble, so he resorts to... lying.

Sorry, toots, you have been "schooled".

"but elsewhere is an ivy/stuy alum--of course he's smarter than buffet--and he's very productive--of snippy commentary all over this board

elsewhere=loser

back to work with me"

Yes, I generally find that the folks who spend their time following around other people and calling *them* names are superproductive, rich, and totally non-losery members of society.

riiiiiiight...

;-)

Right ubottom?

"yeah, somewhereelse, and how many jobs has your Shakespearean foot model-actress-cateress-waitress software programming Olympic luge-ing gazillionairess wife created?"

She drowned in the 2 inches of water left in Lake Las Vegas. I left a warning note but my near-illiteracy made it impossible to decipher. I also confused left and right (in addition to up and down).

"Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious."

Thankfully, we don't have any of those high-value houses in NYC, just high-value apartments.

High price..... not high value.

As a value investor, there is no way Buffet could be referring to Manhattan with this - "Meanwhile, home prices do seem a little cheap, using fundamental metrics like price/rent and price/income ratios, but not extremely so," But do notice, bulls/apologists, that he looks at FUNDAMENTAL METRICS. That is the only takeaway here. That is also something most/all of you refuse to do when arguing for modest downside. If this statement above from Buffet applied to Manhattan, then you could apply his conclusion to Manhattan.