Buffett: 'Buy a house now'… Housing getting cheaper (more attractive)… Sjug pounds the table… France's limit on achievement… Wyoming plans for the End of America…


 "Single-family homes are really cheap now, too," Warren Buffett said yesterday in a CNBC appearance. The other cheap asset class he previously referred to was equities. Buffett said he would personally buy "a couple hundred thousand" homes if it were practical. And if you hold houses for the long term and purchased at today's low rates, he says housing is even better than stocks. Buffett advises taking out a 30-year mortgage and refinancing if rates go down.

 Buffett is bullish on housing even after saying he was "dead wrong" about a housing recovery occurring last year. From his annual letter…

 

Last year, I told you that "a housing recovery will probably begin within a year or so." I was dead wrong. We have five businesses whose results are significantly influenced by housing activity. The connection is direct at Clayton Homes, which is the largest producer of homes in the country, accounting for about 7% of those constructed during 2011.

 

 

 

Additionally, Acme Brick, Shaw (carpet), Johns Manville (insulation) and MiTek (building products, primarily connector plates used in roofing) are all materially affected by construction activity. In aggregate, our five housing-related companies had pre-tax profits of $513 million in 2011. That's similar to 2010 but down from $1.8 billion in 2006.

 

 

 

Housing will come back – you can be sure of that. Over time, the number of housing units necessarily matches the number of households (after allowing for a normal level of vacancies). For a period of years prior to 2008, however, America added more housing units than households. Inevitably, we ended up with far too many units and the bubble popped with a violence that shook the entire economy. That created still another problem for housing: Early in a recession, household formations slow, and in 2009 the decrease was dramatic.

 

 

 

That devastating supply/demand equation is now reversed: Every day we are creating more households than housing units.

 


The latest data from the Standard & Poor's/Case-Shiller home-price index (the bellwether) shows housing prices are still falling… Home prices fell 0.5% in December – the fourth down month in a row. On a year-over-year basis, home prices fell 3.99%, worse than the 3.65% expected. Of the 20 cities tracked in the index, only Detroit showed a year-over-year gain. Meanwhile, prices in Atlanta, Las Vegas, Seattle, and Tampa dropped to their lowest point since the housing crisis began. Overall, home prices have fallen 34% since the crisis, down to 2002 levels.

 While prices are still falling, sales are increasing. The index measuring pending home sales increased 2% in January, besting expectations and pushing the index to its highest point since April 2010, according to the National Association of Realtors.

 And yes… despite falling prices, Steve Sjuggerud is every bit as bullish on housing as Warren Buffett. Steve wrote a February 21 DailyWealth
essay called "This Is the Moment I Live For as an Investor." Steve's been excited about housing for months. He told readers, "I'm more convinced of what I'm saying here than I have been about any other investment in my two decades of studying investments." He continues…

 

The basic story is that housing is an incredible value right this moment: With mortgage rates at record lows TODAY (at 3.87%) and with a record "bust" in home prices, housing is more affordable than ever. PLUS, we're at the "puke" point – where banks are giving up properties at any price, just to get rid of 'em. PLUS, the government is getting in on the act, trying to help.

 


In addition to his DailyWealth writings, Steve incorporated his housing commentary in the most recent issue of his flagship advisory, True Wealth. Steve launched True Wealth based on his belief that subscribers can make big returns without taking big risks. Recently, Steve released a series of reports on investments that can give you incredible gains… but come with virtually no risk of going down. Click here for the details.