Record breaking foreclosure rates…12 straight months of increased mortgage delinquencies…historically low mortgage rates…excess inventory…depressed housing starts…10% unemployment rates…it is enough to make anyone sick to their stomach. The past few years have been a wild ride and everyone is looking to when it will stop. It appears Warren Buffet has put his neck on the line and is predicting that the Real Estate market downturn would end by 2011. A primary driver of his prediction is the steady decline of housing inventory…which is something I can't argue with as we have seen a steady decline over the past 18 months along the Emerald Coast.
“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote in his annual letter to the shareholders of Berkshire Hathaway, where he is chairman and CEO. “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.”
He also pinpointed what he sees as the cause of the downturn. “People thought it was good news a few years back when housing starts – the supply side of the picture – were running about 2 million annually,” wrote Buffett, “But household formations – the demand side – only amounted to about 1.2 million.”