U.S Housing to Recover by 2011 – Warren Buffett

According to Bloomberg, Warren Buffett wrote to his Berkshire Hathaway (NYSE: BRK.A) shareholders in his annual letter that the U.S housing crisis in likely to be over by 2011. He said that the prices of the houses will mostly be below the ‘bubble’ level, but every seller of a U.S home will likely find a buyer. The worst housing crisis since the Great Depression has left one in five of U.S homeowners owing more than the value of their houses. Record foreclosures in the last two years have flooded the real estate market which already has a large number of unsold homes.

Berkshire owns a real-estate brokerage business that helps construct pre-fabricated houses. The business has suffered during the crisis as its earnings before taxes fell by 9 percent to $187 million. Shaw Industries, the carpet maker, saw earnings fall by as much as 30 percent. Buffett is said to be heavily invested in the housing sector and is likely to be a big gainer when the housing market recovers.

Berkshire invested heavily during the financial crisis by financing companies like Goldman Sachs (NYSE: GS), General Electric Co. (NYSE: GE) and Dow Chemical Co. (NYSE: DOW). These deals have paid dividends and an interest of $2.1 billion annually during the last year. The conglomerate had $30.6 billion in cash and cash equivalents as of Dec 31st, 2009. Buffett used about $8 billion of its cash to fund the rail acquisition last year. Berkshire’s net income rose 61 percent to $8.06 billion in 2009.