Seeking Alpha

Buffett's been betting big on housing, and not just in ResCap loans. A few reasons to play...

Buffett's been betting big on housing, and not just in ResCap loans. A few reasons to play along, according to Joe Light: 1) New-home inventory is at a five-decade low (heading to less than six months' supply); 2) Prices are making their move up, and may have momentum; 3) price-to-rent ratios are back to levels from a decade ago. He's seeing investors playing it with builders like KBH and LEN as well as shorter-lease REITs. (video, 3:20)
Comments (34)
  • Foreclosure activity is picking up again in judicial states. Real estate investing is about location, the concept of a national market is a bit of an illusion. Rents in Manhattan are at all time highs, as are the prices of the apartment buildings themselves. Same is true of DUMBO and some neighborhoods in Brooklyn. But drive to the wrong neighborhood in Harlem or central Brooklyn, and those values vanish. I can rent an apartment in Atlantic City year round for $700/month, but in Morristown, NJ I'm lucky if I can find a place for $1,000.


    The way to play real estate is either buy to buy real estate, or to buy REITS. The home builders still need to consolidate, imo, before they're worth a look.
    4 Aug 2012, 08:23 AM Reply Like
  • Construction employment to Nonfarm employment is at a 66 year low....lowest since June 1946
    4 Aug 2012, 09:51 AM Reply Like
  • In order to play the home market one needs to understand where the economy is going. If the Dems win in November then you want to own low income housing, because they are the masters at creating low income rental tenets. If the Repubs win in November then you will want to play the middle income housing market, they will rather quickly start to rebuild the middle class (but there will be a 2 or 3 year delay while the changes start to percolate).


    If the Dems win in November i would not touch builders under any circumstance. Remember that the Dems still want to give away housing for votes and this is what destroyed the housing market in the first place.
    4 Aug 2012, 10:13 AM Reply Like
  • Let's introduce facts....


    Faster private jobs creation in US history under democrats.



    "The BGOV Barometer shows that since Democrat John F. Kennedy took office in January 1961, non-government payrolls in the U.S. swelled by almost 42 million jobs under Democrats, compared with 24 million for Republican presidents, according to Labor Department figures. Democrats hold the edge though they occupied the Oval Office for 23 years since Kennedy’s inauguration, compared with 28 for the Republicans. Through April, Democratic presidents accounted for an average of 150,000 additional private-sector paychecks per month over that period, more than double the 71,000 average for Republicans".


    Under a democrat president real middle class wages go up, they go down under a Republican...


    Do facts hurt?
    4 Aug 2012, 09:53 PM Reply Like
  • Then how come the American public doesnt elect a democrat every election?
    4 Aug 2012, 10:16 PM Reply Like
  • Great response!
    4 Aug 2012, 10:38 PM Reply Like
  • O and incase anyone actual read the article Anonymous is so quick to call Gospel, heres the end, where is says half those jobs came under Clinton (think right before the dot com bubble) and that Republicans have been better at creating public sector jobs since 1961.:


    "Clinton’s eight-year tenure accounted for half of the Democrats’ total private employment gains over the past five decades. More than 60 percent of the Republicans’ increase came during Reagan’s two terms in office.


    Republicans, campaigning on pledges to cut government spending and programs, had a relatively better record at creating public-sector jobs. Since January 1961, federal, state and local government employment grew by 7.1 million under Republican presidents and 6.3 million when Democrats were in the White House. Government agencies added an average of 21,000 jobs per month under Republicans, compared with 22,000 for Democrats. "


    Here's the actual article, since the link above wont work for me:


    These facts are meaningless anyway, since they ignore what party controlled Congress, what the economy looked like going into a change in the party controlling the White House, and when oil price spikes occurred. Oil price spikes have resulted in the majority of recessions in post-war America. A president needs Congress to pass laws. The economy isn't operated like a light switch, job growth and losses bleed from one presidency to another. Summing up these numbers is a pointless exercise in statistics, and not a whole lot more.
    5 Aug 2012, 01:07 AM Reply Like
  • It doesn't matter, republicans create less private jobs, market underperforms and real wages go down.


    Who was in charge in 1929? Hmmmm....republicans...


    Who was in charge in 2008? Hmmmm...republicans...


    They only destroy the economy, then democrats have to clean up their mess as always.


    5 Aug 2012, 08:39 AM Reply Like
  • "Republicans, campaigning on pledges to CUT government spending and programs, had a relatively better record at creating PUBLIC-SECTOR JOBS."




    So republicans are always ranting about big government, but they create more jobs in the public sector than in the private sector...


    Conclusion; Democrats create jobs in the private sector, Republcians in the government. So much for cutting spending, thanks for nothing hypocrites.
    5 Aug 2012, 09:10 AM Reply Like
  • "Under a democrat president real middle class wages go up, they go down under a Republican...


    Do facts hurt?"


    What rock do you live under.


    Number 1 you need to understand how to fact find. Just look at what drove the improvement, ignoring the political whitewashing and really attempt to understand what stimulus actually occurred and why it drove improvement.


    Number 2 you need to use logic to arrive at a conclusion, not political rhetoric.


    So if you take off the blinders you will see that there is a time lag between stimulus and the resulting improvements. So what happens in real life? Republicans fix the problems, everyone starts feeling better, then since they feel guilty about the downtrodden they elect a Democrat, and the Democrat takes credit for the fix then starts destroying the economy. Then the cycle repeats again. The fact are there if you want to see them.
    6 Aug 2012, 10:30 AM Reply Like
  • "These facts are meaningless anyway, since they ignore what party controlled Congress, . . . "


    While I 'liked' your comment because it was generally correct, the facts do matter. The problem is the government rhetoric is so good at presenting the wrong information as facts.


    The facts are:
    1. The president does not pass legislation that effects the economy. Only Congress can do that, so who is in control of Congress is a major fact.


    2. There is a delay between stimulus and result. That delay is not fixed so some things happen faster and some slower.


    If one actually applies these two real facts then historically there is a big positive difference when Republicans are in control. Of course its a bit too complicated for the average liberal, socialist, or democrat to understand which assumptions are facts and which are just plain rhetoric. But there is more.


    3. There is a reason why both Clinton and Obama kept most if not all of the republican tax policies. Why? Because they worked. Lets see how they spin that. What destroys the economy is government spending. There are no facts that indicates that government spending is good for the economy. It does however, buy votes.
    6 Aug 2012, 10:53 AM Reply Like
  • > Republicans fix the problems


    Hhmmm...a simple look at history seems to be the opposite to me.


    Republicans repealed Glass-Steagall (, the economy blew up, now they are blaming Democrats for not fixing it.


    Republicans founded voodoo economics (, which has creates some of the greatest wealth (and opportunity) disparities in history (, and they are both blaming the Democrats and simultaneously claiming that it's a good thing. Republicans excel at cognitive dissonance.


    Republicans seek to continue to de-fund regulators ( and water down regulation implementation, and continue to claim that Democrats are to blame for all the banking shenanigans that continue to go on.


    So what, precisely, are these miraculous stimuli that "actually occurred" and why did they drive improvement???


    Because all I see is a lot of actions that drive the illusion of growth and funnel all the real money to the top.


    I will anxiously await your well-sourced citations of your claims. :)
    6 Aug 2012, 11:07 AM Reply Like
  • "Hhmmm...a simple look at history seems to be the opposite to me."


    Which history? The real history or your made up fantasy. Freedom makes the best system for people to prosper (at least the ones that want to work). The government system is geared towards rewarding the people that do not want to work. So why should people work when they can get it for free.


    All one has to do is look at what motivates people versus what makes people vote for a particular candidate (free giveaways) and it becomes clear that reducing government, reducing taxes, and reducing regulations are all good for the long term.


    With respect to Republicans all I can say is that many of them are just democrats and socialists in disguise (we call then RINOs). But if you look at damage, then its clear that Democrats damage America much more than Republicans. But yes, Republicans are not free from blame. Republicans should stand up to Democrats instead of trying to copy them.


    "I will anxiously await your well-sourced citations of your claims. :)"


    My well-sourced citation is called 'common sense' and it includes the ability to ignores the lies that we are bombarded with daily by the media and other political hacks. Anyone with an open mind and 5 minutes of research will see that your links are total BS.


    For example the CBO indicated that Obama care would not cost anything (revenue neutral). And now guess what? We know that was an out and out lie. So why would you believe their number about supply side economics (from your link)? Common sense dictates otherwise to everyone else, but not you. Wonder why?


    You other link was about defunding SEC. Again common sense indicates that is needed. The SEC failed to enforce their mandate and let banks and everyone else steal this country blind. So what good are they? Answer: none.


    Gramm–Leach–Bliley Act (GLB) (repealed Glass-Steagall) was signed into law by Clinton and 84% of senate democrats and 75% of house democrats voted for it. So it was truly bipartisan and now you want to blame Republican's. See again no common sense.


    All politician's are bad, it is just that Democrats are worse than Republicans, not that Republicans are saints.
    6 Aug 2012, 02:54 PM Reply Like
  • > My well-sourced citation is called 'common sense'


    Ah, so you're using the "making stuff up" and "wild baseless assumptions" approach.


    I guess facts DO hurt?


    > So it was truly bipartisan and now you want to blame
    > Republican's


    I'll grant you that far too many Democrats (shamelessly) voted for it. I don't really blame Clinton, as it was a veto-proof majority and he didn't have the political capital to burn on a symbolic veto...and frankly Clinton is in bed with the banks anyway. But GLB was Republican-sponsored by a Republican-majority congress, so its inception is still a Republican offense.


    > Again common sense indicates that is needed. The SEC
    > failed to enforce their mandate and let banks and everyone
    > else steal this country blind. So what good are they?
    > Answer: none.


    This flies in the face of all common sense. The cops couldn't catch every crook so just do away with the police force entirely? That's the most ignorant thing anyone's ever heard of.


    > All politician's are bad, it is just that Democrats are worse
    > than Republicans, not that Republicans are saints.


    This is the only semi-sensible think you've said. The only way in which we disagree here is that I'd say "it's just that Republicans are worse than Democrats, not that Democrats are saints."


    Maybe we're not as far apart as you rant that we are? :)


    Rant on!
    6 Aug 2012, 05:24 PM Reply Like
  • "I guess facts DO hurt?"


    No, just because someone someplace prints a statement does not make it fact. In 30 seconds of reasoning, what you supplied does not stand the common sense test. Simple as that. I don't need to research the fact that CBO lies intentionally to know they cannot be trusted for anything.


    With regard to Gramm–Leach–Bliley Act (GLB) (repealed Glass-Steagall) we probably agree more than disagree. It was a bad decision, but not as bad as the 2009 Congress forcing FASB to suspend rule 157 (fair market value) to allow deceitful accounting for TBTF banks. And guess what, that was all democrat, democrat congress, and democrat President.


    For every bad Republican action I can find several bad Democrat actions. There is a reason by Democrats have to act like Republicans to get elected and to stay in office. Fact, Obama continued every one of Bush's tax strategies. Why? Because he knows the Democrat strategy will kill the economy and his election chances unless he waits until after the election. Why do you think Obamacare was postponed until 2013. There are no facts that need to be researched all you have to do is look at the democrat strategy (no budget, delayed implementation, etc) and its clear that democrat strategy will kill the economy. We know it, the Democrat leadership know it, the only ones that don't know it are democrat voters.


    Why don't you ask why your democrat leadership did not do what they promised in the election; still at war, still have cuba, no transparency, no improvements in privacy, still have Bush warrantless monitoring, and continuous extensions of Bush tax cuts. The only thing they have done is sink the economy with Obamacare. And thats going to get them creamed in the election.
    6 Aug 2012, 05:56 PM Reply Like
  • Neil459.


    Republicans have always fixed the problems, case in point: 2000 Dot com bubble. Who created that? Democrats.


    Who pushed for deregulation of banks(Glass Act)? Democrat...


    Socialism is not the answer!
    6 Aug 2012, 07:20 PM Reply Like
  • > Who pushed for deregulation of banks(Glass Act)? Democrat...


    Ignorant, untrue statement:
    6 Aug 2012, 07:56 PM Reply Like
  • Doesn't matter who is power...the business cycle determines what is
    too little and what is too rules over all...
    4 Aug 2012, 10:52 AM Reply Like
  • Correct. Supply and demand always wins.
    4 Aug 2012, 11:32 AM Reply Like
  • R U kidding? We dont have a business cycle! How can you have a cycle when central banks are IN private markets, propping markets, setting artificial interest rates and engaging in a massive ponzi scheme. Is it part of your "cycle" for the US to be the largest owner of its own debt? Is it part of your "cycle" for the fed to be acquiring bad assets? Did you miss the last 3 years? Poverty rates are record 40 yr levels, net worth plunging 38%, massive air coming out of the debt bubble, an administration that redistributes wealth and picks and choses favorite industries based on political objectives. Where is the "cycle" in socialistic medicine? Where is the "cycle" in solar businesses? Where is the "cycle" in autos when obama has pushed the pedal to the floor on buying vehicles from GM with tax dollars? Where is the "cycle" in hiring when 9 out of 10 employers are hoarding cash and fearing an oppressive government? Our government has its fingers in almost every part of the economy. Where is the "cycle" when our energy dept has a stated goal of raising gas prices to equal those in europe while promising to destroy the coal industry? It doesnt have to be this way.
    4 Aug 2012, 12:01 PM Reply Like
  • "Doesn't matter who is power...the business cycle determines what is
    too little and what is too rules over all..."


    Delusional, the new term is government cycle. It rules above all else in a socialist or fascist economy.
    4 Aug 2012, 12:35 PM Reply Like
  • > Supply and demand always wins.


    Nonsense, the only thing that matters is supply. Ask any conservative. :)
    4 Aug 2012, 01:40 PM Reply Like
  • My, my, tax dollars for just GM cars? Maybe tax dollars to save tens of thousands of jobs. Better to adhere to a rigid ideology than try and do something that might or might not work? Ha! Glad I don't have a rigid belief system in my everyday working and play life. Do you realize in "socialist" Europe, the poor have a better chance of advancing than in the US?
    4 Aug 2012, 09:51 PM Reply Like
  • Another bubble in the making. Looking to short housing and REIT indexes as they become further overvalued...
    4 Aug 2012, 12:58 PM Reply Like
  • I am a real estate broker in San Diego and can tell you our local market has defiantly changed for the positive. From an investment point of view I'm playing this through a few selected financial stocks. Number one being E*Trade (ETFC). I have to believe the massive portfolio of loans that has been dragging them down for years now is going to switch from being a negative to at least neutral to positive. Thoughts?
    4 Aug 2012, 01:54 PM Reply Like
  • You bought E*Trade as a bet on the rebound of real estate?


    Of course you didn't. You bought E*Trade for any number of unrelated reasons, and are now looking to justify to yourself why you continue to sit on this loss.


    The fact that you're a real estate broker doesn't give you any special insight on the housing market. The numbers for any major area are published monthly, and there are other ways to track it with even finer granularity without having to drive around showing people semi-detached town-houses.


    There are many direct ways to bet on a housing recovery. Buying E*Trade stock isn't one of them. I think you nailed when you said, "I have to believe" - for you, this seems more a matter of faith than of analysis.
    4 Aug 2012, 02:50 PM Reply Like
  • The population is constantly growing - real-estate has to keep up.
    4 Aug 2012, 09:32 PM Reply Like
  • That is the exact rationalization that inflated the housing bubble. And populations can move. Detroit has seen declining population for decades.
    4 Aug 2012, 10:18 PM Reply Like
  • Done by those who can't do math. Build ten condos and sell all ten to a single property flipper should give one pause. Yes, very easy to over build when greed gets in the ol' noggin. But, if the supply stagnates and the population keeps growing - well, you do the math. Think auto sales.
    5 Aug 2012, 06:20 PM Reply Like
  • Population growth? I thought this administration is pushing contraception and abortion.
    5 Aug 2012, 08:33 PM Reply Like
  • Except you can ship a car to another region of the country if sales in one region are lagging, houses don't move. The local demographics drive the housing market, not the national ones. Populations can move and household formation can slow, so saying that because the population is growing nationally that real estate prices much continue to grow everywhere is not a well thought out investment thesis.


    And developers don't care who buys what they build, as long as they can sell profitably.
    5 Aug 2012, 09:04 PM Reply Like
  • I think "allowing" is the proper word, not pushing/forcing. Of course, being male, contraception is something you really don't have to worry about, is it? Unless you're married and your wife has already popped 4 kids. Like to have your insurance provider say "no way man, be fruitful and multiply"?
    5 Aug 2012, 09:30 PM Reply Like
  • Agreed. Look at the bay area in CA, prices are still way too high for mere mortals. Everyone sells for profitability, I don't care who buys my product.
    5 Aug 2012, 09:40 PM Reply Like
  • I've owned E*Trade for a long time but have added to the position at the 52 week low based on the loan portfolio recovery as a long term investor in the name seems like a opportunity to me. I also like that many financial stocks are out of favor in the current market.


    You don't have to be a broker to see the rebound, that's obvious as Buffet isn't a broker and neither are you so not sure what the point is on that, as an insider we see trends before the monthly stats are published, even then real estate is extremely local so a rolled up monthly statistic doesn't always tell the story especially with how long it takes for a short sale listing to close which I suspect impacts the numbers.
    4 Aug 2012, 03:05 PM Reply Like
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