Warren Buffett’s thoughts on Real Estate

Well, spring has descended upon us!  I am trying to enjoy the 70 degree weather here in Vermont in March – and trying not to think about how this over-the-top spring like weather is affecting the local economy. 

While the weather patterns dictate our local travel and tourism based economy, there are some general economic factors that support a healthy real estate forecast for 2012 and beyond.  Recently, Warren Buffett – the so called “Oracle of Omaha” was interviewed on CNBC.  He recommends buying real estate over investing in a diversified group of leading companies. 

It has been a long time since buyers and sellers heard that kind of good news!

Buffett said that along with stocks, single-family homes are cheap and attractive investments.  In contrast, investments in Treasury bills, gold or simply keeping money in cash are not as attractive.  He also said that if he had a way to buy “a couple hundred thousand single-family homes” and easily manage them, he would “load up on them” and “take mortgages out at very, very low rates”. 

In reality, managing “a couple of hundred thousand single-family homes” is an impossibly Herculean logistical task.  In my last blog I mentioned several reasons for the real estate market improvement:

• Interest rates are at a historic record low.
• Baby Boomers are nearing retirement and have the ability to snap up high end properties at lower than usual prices.
• Some people who watch the real estate market feel we won’t see further drops in value.
• Some buyers who have been on the side-lines for the past several years are ready to re-enter the market.

Let’s face it – it is much easier to buy stocks with a few keystrokes and mouse-clicks.

So while this news is good for investors and Warren Buffett followers – who really will benefit?  When asked if a young individual should buy stocks or his first single-family home, Buffett recommended buying a single-family home with a 30-year mortgage.  “It’s a terrific deal,” he said.  “It’s a leveraged way of owning a very cheap asset now and I think that’s probably as an attractive an investment as you can make right now.”

Are you looking to complete the “American Dream” and own your own home?  Are you interested in the second-home market?  There are great buys to be had out there and interest rates make an attractive investment.  As I’ve mentioned before – if you are thinking about buying property in this area – now is the time to do so!

Until next time, Irene