Berkshire is moving into the homebuilding industry, but high mortgage rates have hurt the sector.
Berkshire is moving into the homebuilding industry, but high mortgage rates have hurt the sector.
Nearly five years after the pandemic ended, the housing market remains in a rut.
A combination of factors, including the lock-in effect from low rates during the pandemic, mortgage rates now above 7%, stubborn inflation, and rising home prices, has kept the housing market frozen.
Existing annual home sales have hovered around 4 million since the post-pandemic cooldown in 2022, well below the 5.5 million they were averaging before the pandemic. By comparison, even during the housing crash during the Great Recession, existing home sales were only briefly under 4 million, and that was when the U.S. population was significantly smaller.
Investors who have bet on homebuilders, thinking they would alleviate the housing shortage and create inventory while most homeowners are holding on to rock-bottom mortgage rates, have mostly been disappointed, as the sector has been flat over the last few years, even as the broader market has soared.
However, that underperformance hasn't deterred Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), which has gone on a shopping spree in the sector lately.
While Warren Buffett is no longer guiding the company's investments, Buffett was a fan of the homebuilding industry as Berkshire acquired Clayton Homes back in 2003.
What Berkshire is doing in the homebuilding industry
Following recent moves by new CEO Greg Abel, Berkshire Hathaway is now the nation's 4th-largest homebuilder.
Those moves include the acquisition of Taylor Morrison, an Arizona-based homebuilder, for $6.8 billion. Berkshire said it would combine Taylor Morrison with Clayton. It also acquired South Carolina homebuilder McGuinn in July.
Averytin News Financial update.