Buffett’s Housing Unit Outlook Raised by S&P Amid Rebound

Clayton Homes Inc., the maker of manufactured houses owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), had the outlook on its long-term debt raised by Standard & Poor’s amid an improving U.S. residential real estate market.

The credit-rating company changed its outlook on Clayton to stable from negative in a report today, citing the housing unit’s improved profitability and an increase in new retail sales last year from 2011. Clayton’s BBB rating may be raised if the company’s leverage decreases or if earnings advance consistently, S&P said.

“The stable outlook reflects our view that Clayton’s business and financial positions will gradually improve as the broader U.S. housing market continues to heal,” S&P wrote. “After several years of decline, following the U.S. housing bubble, residential real estate is showing signs of recovery.”

A rebounding housing market has helped Omaha, Nebraska- based Berkshire’s subsidiaries that make carpet, bricks, insulation and houses. Pretax profit at Clayton climbed to $255 million last year from $154 million in 2011, Buffett, 82, said in his annual letter to shareholders March 1. The housing unit boosted production 14 percent last year, he wrote.

New-home sales climbed 15.6 percent nationally in January, the most in two decades, to a 437,000 annual pace, Commerce Department figures showed last month.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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