Buffett Sees End To Residential Real Estate Slump in 2011
In his annual letter to Berkshire Hathaway shareholders, billionaire investor Warren Buffett predicted the U.S. residential real estate market will recover from its current doldrums by next year, which is when he predicts demand for houses will catch up with the excess supply created in the housing bubble.
“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote in the letter. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means.”
Buffett cautioned in his letter that “high-value houses and those in certain localities where overbuilding was particularly egregious” will take longer to recover from the slump. He identified overbuilding as a prime cause of the housing market crash, noting that in a recent year when housing starts were running at an annual pace of two million units, new household formation lagged seriously behind the supply, at only 1.2 million.
He said that the resulting halt in housing construction was the best of three possible ways to correct the imbalance.
By John SkinnerThe Westside/South Bay Market Is On Fire. . .Especially Under A Million
Realtors working with buyers looking for homes in the Westside/South Bay market that are listed for under a million dollars feel like they are in a time warp as today’s market is reminding many of us what the 2004-2005 market was like. Thanks to the $8,000 tax credit, FHA financing, low interest rates and limited inventory, buyers are constantly facing multiple offer situations on market priced homes and having to provide proof of funds to cover the down-payment, full loan approval and anything else they can do to garner favor with the seller.
In the past seven days I have written 6 offers for clients ranging from $400,000 to $950,000 and all of them ended up in multiple offer situations that went over the asking price. Despite FHA financing allowing for buyer’s to only have to put down as low as 3.5% of the asking price, most of the buyers seem to have at least 20% down which is a good sign for the economy and shows that buyers who were on the sideline during the dramatic rise of the market have decided its time to jump in.
The first time homebuyer market under $750,000 is absolutely packed with buyers. This past weekend, a 3-bedroom 1,069 square foot new listing for $589,000 in the South Kentwood area of Westchester had around 200 people attend the Sunday open house and received 12 offers as of Wednesday morning. Each market priced home seems to have at least 3 buyers vying for the property.
I was caught a little off guard by this activity and don’t think it will last when the stimulus is no longer in play. However, even if the market dips again in the less than million dollar Westside/South Bay market, the lows of 2009 will not be surpassed.
Though I don’t believe we have seen the absolute bottom in terms of prices in the market above a million dollars, activity is definitely heating up. A new listing last week in the 300 block of 11th street in Santa Monica, which is approximately 3,800 square feet on a 7,500 square foot lot, received 5 offers and is supposedly in escrow well above the $2.675M list price. Furthermore, during yesterday’s broker caravan a house on Terryhill Place in Brentwood listed for $1.795M had over 170 agents and buyers tour it in a three hour period. . .
**Please note this only pertains to single family homes and not condos. Some condos are moving fast but this segment of the market is not as strong as the single family market.
February Sales Data For Single Family Homes + Analysis
-click on the above image for an enlarged view.
Quick Analysis:
*The most expensive sale of the month 1141 Summit Drive in Beverly Hills sold for $16.5 million. The 16,800 sq. ft. home sitting on one acre debut on the market in September of last year for $23.5 million. . .a 30% hair-cut from the original listing price.
*The second most expensive purchase was made by Alethia Research and Management (high-net worth money management firm) founder Peter Eichler for $15,000,000. The Malibu Road home boasts 4,459 sq. ft. and is brand new construction. . .
*Other than the high-end sales above, activity above 5 million still remains light. No sales in the high-end neighborhoods of Manhattan Beach, Pacific Palisades, Brentwood and Santa Monica surpassed the $3.4 million mark according to the MLS.
*Most sales recorded under a million dollars were on the market for less than 30 days.
*With the exception of Cheviot Hills and Manhattan Beach most areas saw a healthy increase in sales compared to February of last year.
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