Buffett said he believes purchasing a home with today’s historically low mortgage interest rates and holding it for the long-term has actually become a better investment than stocks right now. This, from someone who has always put stocks above all other investments. In his annual letter to shareowners, Buffett wrote, “Housing will come back, you can be sure of that.”
In explaining his investment picks and pans, Buffett said he would shy away from gold and treasuries, the latter of which he said will not keep up with inflation, particularly after taxes. Instead he said he prefers to put his money into investments that he considered to be “productive assets.” Within this category are stocks and real estate.
According to the Buffett, real estate and stocks not only boast the greatest upside potential, but also are safer investments in the long run than treasuries and gold.
In a recent interview with the International Business Times, Buffett forecasted an increase in household formations as the economy continues to recover. He believes that more people who moved in with their parents or in-laws during the recession will soon look to move out and get their own home soon.
According to the International Business Times, the annual pace of housing starts in the U.S. last year was just 609,000 – far less than the household formation of 1.14 million. Eventually, this imbalance will absorb the oversupply in the housing market, Buffett said, although how long this process takes could vary widely among various local U.S. housing markets. “Demographics and our market system will restore the needed balance – probably before long,” he said. No one knows for sure what the future holds, but I agree wholeheartedly that if you’re looking to invest in a home for the long term you couldn’t find a better time.
On a related note, sales of existing single-family homes in the Bay Area increased by 10.7 percent in February compared with a year ago, according to a report released Friday by DataQuick, the La Jolla-based real estate information firm.
This marked the biggest increase for February in five years, according to DataQuick, and the eighth straight month of year-over-year sales increases for the Bay Area.
One last item of interest: Remember just a year and a half ago when consumption and spending seemed to be at an all-time low? There were articles appearing about a possible trend in Renting versus Buying. Well just two weeks ago, The San Francisco Business Times took a poll, asking readers if “renting is the new American Dream.” Despite the challenging housing market in recent years, homeownership still won by a wide margin. Some things never change! Here’s a copy: