I heard part of an interview with Warren Buffet this morning on Bloomberg television. He said that housing, residential new construction, is the key to getting the economy back on track. I've believed that for a long time but it's the first time I've heard someone of Mr. Buffet's stature say it. He said it is improving, but of all the seventy plus businesses that Berkshire owns, the only ones still struggling are the ones tied to housing and housing starts in some way. He said the rest of the economy is firing on all cylinders and has fully recovered, it's only housing related business that are struggling. His opinion was that once housing starts get above one million per year, that the economy will get back to full recovery and unemployment will quickly drop to about 7 %. He said he sees that happening in the next two years because we are producing more new households than new homes. He said it has been improving consistently since 2009 but still has a way to go.
Being in the building products industry I see this message in two ways, good and bad. It means, if he is correct, that there is an end in sight to this never ending recession. But the negative part is it could be another two years of very slow growth for our industry. I guess the real positive message I got from this is that it is absolutely the right time to buy an existing home now. Prices of homes across the country are at historical lows and mortgage rates are also at all time lows. Credit has eased up to where most people with jobs can get a good mortgage at a good rate. I believe this will be the start of the rebound. People finally able to buy a different home - existing new or used, to be able to move to where the jobs are without the fear of not being able to sell their old home. Once existing homes start turning well, then new construction will naturally start to rebound too.
The time to look into a new home for you and your family is now when everyone is still cautious and worried. Once the realization sinks in that homes are starting to sell well you will be too late. Then credit could get tighter again and prices will naturally start raising. I think it's pretty clear we've made it to the bottom of the housing cycle and the trend from here will be improvement in the industry. So for all of you that have been waiting before making a decision, you better start putting your ducks in order and start looking for that new home, if you wait much longer you will have missed the opportunity of a lifetime.