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Warren Buffett sure has changed his story.

A year ago, he told investors that almost everything in the economy was on a steady upswing, and it was residential housing that was holding back growth.

“I've got a little different story this time,” Buffett said on CNBC Thursday. “... The last two months, it's been just sort of the opposite.”

Buffett now sees increasing residential housing demand.

Rental yields are now positive in most major housing markets. More than a dozen saw a double-digit rise in median listing prices in May. And Bloomberg reports that bidding wars are erupting in some markets amid a drop in the number of homes for sale.

Investors have taken notice. One of the top-performing ETFs in the first-half of the year was the iSharse Dow Jones U.S. Construction Index Fund (NYSE: ITB), up more than 41%, and rallying to its highest point since 2008. Top holdings include Lennar Corp (NYSE: LEN), D. R Horton (NYSE; DHI), Toll Brothers (NYSE: TOL) and PulteGroup (NYSE: PHM).

A caveat, however, is a potentially rising foreclosure rate. Data from RealtyTrac released Thursday suggest U.S. foreclosure starts rose year-over-year in June for a second-straight month, suggesting that completed foreclosures might again be on the upswing next year.

Overall, there are now additional headwinds facing the U.S. economy than there were a year earlier, Buffett said. He said he remains in a holding pattern on where the economy is headed next.

“Europe is really, it's headed downward in the last … six weeks or so,” Buffett said. “It wasn't going that way before. It wasn't doing that well, but it hadn't really hit the skids.”

On the other hand, Buffett highlighted positive signs for the U.S. economy. "Our freight car loadings are up week-by-week ... when you're looking at our retail sales, jewelry or furniture or you name it — yards of carpet are down, our carpet business is better. But on the other hand, if you look at — we're the largest home builder in the country, Clayton Homes, and that's up, brick is picking up, but these are from low levels. But you are seeing — in our real estate brokerage firm, which is the second largest in the country, pending sales are up by a reasonable amount but from a very low base."

Spain's borrowing costs rose again on Thursday, despite additional austerity measures announced this week. Meanwhile, Greek unemployment is still rising, reaching 22.5% in April.

Buffett said he is confident that Europe will be able to work out its problems, although he is not sure if the euro will exist 10 years from now.

When asked about JPMorgan Chase (NYSE: JPM), Buffett expressed support for CEO Jamie Dimon, calling him, "one of the best bankers in the world."

Posted-In: Jamie Dimon RealtTrac Warren BuffettNews Management Markets Trading Ideas Best of Benzinga

 

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