Not Even Buffett’s Confidence Buy Can Spur a Housing Recovery
Poor affordability and rising inventory levels still weigh on the industry, despite the Oracle of Omaha’s recent buys.
Work in progress.
Photographer: Jim Watson/AFP via Getty Images
There’s been renewed optimism about housing in the stock market recently. Mortgage rates have fallen and home improvement giants Home Depot Inc. and Lowe’s Cos Inc. reported an uptick in activity in July. More significantly, Warren Buffett gave his blessing to the industry with Berkshire Hathaway Inc. revealing its holdings in homebuilders Lennar Corp. and DR Horton Inc.
Yet the market rally is premature. The two dynamics that have contributed to housing’s slump — poor affordability and rising levels of inventory — haven’t changed in a meaningful way. A more material improvement in the outlook for housing would require a much bigger move in mortgage rates or a slide in prices that’s unlikely to happen any time soon.