Warren Buffett's Berkshire Hathaway reported that it bought more than $700 million of stock in major homebuilders, a development some take as a positive sign for the real estate market.
The investment giant picked up shares from D.R. Horton, NVR and Lennar, according to information in a filing it made with the Securities and Exchange Commission. Most of the investment was made in D.R. Horton, the nation's largest homebuilder that's upping its stake in single-family rentals. Berkshire Hathaway bought the stock in the second quarter, according to the filing.
Given Buffett's successful track record as an investor, the moves are seen as a sign that the housing market could be on a path to an even stronger performance than it had in the second quarter. For these reasons, the Berkshire Hathaway chief is the Person of the Week.
WHO: Warren Buffett, chairman and CEO, Berkshire Hathaway.
STREET CRED: Buffett has a reputation as a savvy investor. He has been lauded for buying a large stake in Apple. Although he wasn't an early investor in the iPhone maker, he still managed to invest in time to see his stake grow five times in value as of June 30, the day Apple's market value hit $3 trillion. Through more than 50 years of investments in a variety of businesses, from Geico insurance to commercial brokerage Berkadia and homebuilder Clayton Homes, Buffett has risen to No. 6 on the Bloomberg Billionaires Index with a net worth of about $118 billion as of Aug. 20.
WHAT HAPPENED? Berkshire's investment in D.R. Horton, Lennar and NVR emerged last week and prompted real estate columnists to speculate that Buffett's decision could be a good sign for the nation's residential real estate market and companies such as D.R. Horton and Lennar that are increasing their stakes in the multifamily market. "The billionaire’s move indicates the resilience and potential of the U.S. housing market and could be a bullish sign," Sweta Killa said in a Yahoo! Finance piece. "Historically, when Berkshire Hathaway takes a position in a sector, it often leads to increased investor interest and, sometimes, a rally in the associated stocks."
WHY IT MATTERS: Buffett's vote of confidence in homebuilders comes at a time when they struggle to produce enough inventory to keep up with demand for houses and as some have moved deeper into the multifamily and build-to-rent markets. Last month, D.R. Horton said it was making a big bet on its rental business because higher interest rates led to increased mortgage payments and made houses harder to sell. In June, Lennar said it expected its losses to continue in the coming months in the multifamily business. It shelved plans to spin off as a surge of new apartments raised concerns about overbuilding across the country. Berkshire's investment is a potential harbinger of a robust run for the homebuilding sector and a rebound for the multifamily market.
Editor's Note: CoStar News has launched a feature called Person of the Week, highlighting someone whose actions, statements or issues affected the commercial real estate industry. If you'd like to nominate someone for consideration, please email news@costar.com.