When you’re not only one of the richest men in the world, but one with an investing track record that’s produced billions of dollars, the world takes notice. So it is no surprise that economic experts are paying attention to Warren Buffet’s investing firm, Berkshire Hathaway’s, recent move: investing in the housing market.
Or that’s one way to interpret the firm’s purchase of more than $700 million in DR Horton stock in the spring, as well as another $100 million in Lennar Corp. and NVR Corp. Berkshire Hathaway now owns almost 6 million DR Horton shares, 152,572 Lennar shares and 11,112 NVR shares.
DR Horton is considered the largest homebuilder in the United States, at least by volume. This company builds a variety of homes in “desirable locations,” as its website states, for everyone from first time homebuyers to luxury home owners.
Though experts are mixed on their predictions for what the housing market will do in 2024, DR Horton’s recent revenue report may be a bellwether for a stronger-than-expected year to come.
The company’s fourth quarter revenue was better than expected, suggesting that it will hit the ground strong in 2024.
DR Horton’s chairman, Donald R. Horton, wrote in the company’s revenues report, “Despite continued higher mortgage rates and inflationary pressures, our net sales orders increased 39% from the prior year quarter, as the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”
A Housing Shortage Is Good for Builders
Homebuilder stocks have, in fact, been steadily on the rise this past year, partly due to a slowing of existing home sales, which has increased the demand for new homes to be built. According to Investor’s Business Daily, homebuilder stocks as a group have seen an increase of more than 30% in 2023.
And while Berkshire Hathaway’s nearly 6 million shares of DR Horton may seem like a lot, it actually only represents a 1.76% interest in the company. The continuing housing shortage may only drive these stocks up further in the coming year.
What Does This Mean for Homebuyers?
What’s good for stockholders isn’t always good for the average person. A shortage of homes means that home prices are likely to go up. The Mortgage Banker’s Association predicts they may rise by 4.1%, while lender Fannie Mae suggests it may be a more modest 2.8%.
The only upside is that the Federal Reserve has suggested it is done raising interest rates, and there are signs that mortgage interest rates will drop, which essentially may translate to not much of an overall shift in the costs of a home.
If you were already in the financial position to purchase a home, the problem won’t be affording one; it will be finding one to purchase.
With Warren Buffett’s financial vote of confidence in homebuilders, however, it hopefully won’t be too long before the housing market returns to a plentiful supply, leveling out home prices.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
