Why is Warren Buffet buying homebuilders?

Why is Warren Buffet buying homebuilders?
Berkshire Hathaway spent over $800 million on three homebuilders: D.R. Horton, NVR, and Lennar Class B
You would think that with the high interest rate environment, home builders would be getting slammed. This is not the case. They are booming.
I believe that Buffet is speculating that will be high demand for new homes because people with existing homes are locked into low mortgage rates and wont’ sell the house they are in. This is a golden handcuff situation. A golden handcuff is a financial incentive that causes someone to be handcuffed to a situation for a period of time.
We have a situation where there is low housing inventory and a lot of demand for housing at the same time. I believe shows Buffet is expecting a soft economic landing and/or mild recession. I believe this shows that Buffet has confidence that the market will be relatively fine.
An interesting thing to ponder is what happens to the age demographics of the United States. You have an aging population of boomers that will pass away at some point. What will happen to those homes? Well, I’m going to argue that there is already such a shortage of housing inventory, and then you also have immigration bringing new demand for housing. I think the housing market is going to stay strong despite price pressure.
Another thing to think about is all the housing demand in built up areas, that are zoned for single family. This is going to prevent new housing supply coming onto the market. What if we get a situation where we have housing oversupply in some parts of the country, and housing shortages in more urban areas. At this point, I would assume the market would work out the supply and price issue and reach some type of equilibrium. The mechanism for this would be people realizing how high their rent is in New York City and California and going to the South or the Midwest. We have seen this dynamic already.
Another interesting thing happening in the market is people not selling their homes when they move out, but rather renting them out. We have seen how fast home prices have climbed. By renting out your house, you can still benefit from increasing house prices, while also bringing in rent income that can help pay the mortgage. I understand a lot of people do not want to be landlords.
To wrap things up, Warren Buffet is obviously bullish on the housing market, and the USA economy in general. However, the housing market is complex, there are a lot of things going on including interest rates, demographics, and geography. My grandmother was a realtor and she would always tell me “People will always need a place to live.”
Works Cited:
https://apnews.com/article/berkshire-hathaway-warren-buffett-portfolio-investments-fcb74a2ee0aaf61a9416e96c51983892
Tags:
real estate, real estate market, housing market, real estate crash, real estate market today, housing market crash, housing market 2023, real estate investing, stock market, real estate market