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Warren Buffet Shows His Faith in Houseing

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Warren Buffett declared last summer that housing was on the rebound. And it was right around that time that one Berkshire Hathaway  (NYSE: BRK-A  )   (NYSE: BRK-B  ) company stepped on the gas to take advantage of that rebound.

Berkshire owns a majority stake in MidAmerican Energy, which, in turn, owns HomeServices of America. Last fall, HomeServices partnered with Brookfield Asset Management  (NYSE: BAM  ) to create HSF Affiliates, which has taken a majority interest in the affiliate networks of major brands like Prudential Real Estate and Real Living Real Estate. The company is also launching a new brand: Berkshire Hathaway HomeServices.

Gobbling up brokerages left and right
The new brand puts the “Berkshire Hathaway” name front-and-center in the real estate industry. The complete unveiling of the brand will continue throughout this year.

Meanwhile, the parent company — HomeServices of America — 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.

The Motley Fool’s chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: “The Motley Fool’s Top Stock for 2013.” Justclick here to access the report and find out the name of this under-the-radar company.


Redfin-Market Feels Like A Bubble But Its Not

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<a href="http://www.shutterstock.com/pic.mhtml?id=10072099" target="_blank">Housing bubble</a> image via Shutterstock.Housing bubble image via Shutterstock.

An informal Inman News surveyof agents around the countryshows many real estate professionals are experiencing market conditions that, at least on a surface level, resemble those of the housing bubble.

An analysis released today by Seattle-based brokerage Redfinhighlighted key differences between today’s market and the last housing bubble, concluding that while “mini bubbles” may be brewing in a few cities, current market dynamics make it unlikely that national home prices are overheating.

Rising home prices and high demand are creating an environment that feels “bubbly,” Redfin said.

“The market today is so hot that many Redfin Agents are concerned that we’re entering into bubble territory,” Redfin’s Tim Ellis said in a writeup of the company’s analysis. “At a recent lunch with a half-dozen Redfin Agents, Redfin CEO Glenn Kelman asked whether they felt that the market was getting bubbly. They all nodded vigorously.”

But in contrast to conditions during the housing boom, credit standards are rigid and a disproportionate share of home sales are all-cash purchases, Redfin said, noting that price gains are not exceeding income gains and that listings are in short supply.

“Nationwide, we’re not in a bubble,” said Kelman. “Too many sales have been all-cash for people to get in over their heads, and sales volume is still nearly 40 percent below the 2005 peak.”

While there may not be a national bubble, Kelman said Redfin’s analysis suggests some local markets may be overheating.

Markets like Washington, D.C. and Los Angeles, where Kelman said prices have increased more than 25 percent faster than incomes since 2000, “could be vulnerable as interest rates increase over the next year. Just in the past few weeks, we’ve seen buyers using more aggressive loans, appraisals getting looser, and almost every sale turn into a bidding war. Even as the investors who were so active in 2012 start to pull back, others willing to pay more seem to be taking their place.”

Redfin also characterized San Francisco and San Diego as being among the four “most bubbly” markets out of 15 analyzed. The “least bubbly” markets were Atlanta, Chicago, Las Vegas and Dallas.

Read Redfin’s top 10 list of “mini-bubble” real estate markets.