Berkshire Hathaway Chairman Warren Buffett said Saturday that he sees some signs of stabilization in housing markets.
"In the last few months you’ve seen a real pickup in activity although at much lower prices," Buffett said, citing data from Berkshire’s real estate brokerage business, which is one of the largest in the U.S.
In California, medium and lower priced homes — under $750,000 — have been selling more, although there hasn’t been a bounce back in sale prices, Buffett explained.
"We see something close to stability at these much-reduced prices in the medium to lower part of the market," Buffett said.
Roughly 1.3 million households are created each year in the U.S., while about two million homes were being built a year during the recent boom, Buffett added.
At that rate, "you will run into trouble," he said.
Now housing starts are running at roughly 500,000 units a year, which means the excess inventory is being absorbed at a rate of about 700,000 to 800,000 units a year, Buffett said.
"We’re going to eat up inventory. That may take a couple of years. When it gets done you will have stabilization in housing prices," Buffett predicted. "Then you will have demand for more housing starts."
U.S. house prices fell 18.6% the year to February, according to the Case-Shiller index that tracks prices in 20 major cities. However, the rate of decline has slowed as the government tries to keep mortgage rates low to stimulate demand.
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