Warren Buffett is famous for saying:
“When others are greedy… be cautious. When everyone is scared… be brave!”
Well, the real estate housing marketing is bottoming out, and in a recent interview on CNBC’s “Squawk Box” Warren Buffett stated that houses are “an attractive asset class” right now. In fact, Mr. Buffett went so far as to say that he’d “buy a couple hundred thousand of them right now” if he had a way of managing them.
Now is the perfect storm of opportunity for investors. Low home prices, combined with historically low interest rates and a flood of foreclosures on the market means improved cash flow and great buying opportunities for investors! Mr. Buffett pointed out that “5 years ago people were buying like crazy because housing was going up, now no one wants to buy because they’re afraid it’s going to go down!” This statement highlights the problem- too many people WAIT to seize an opportunity and get in at the wrong time. NOW (when the market is at the bottom) is the time to get in.
“I would load up on ’em and take out mortgages at very low rates”, Mr. Buffett says. Further, he points out that buying real estate is a “way to short the dollar because you can take a 30 year mortgage and if it turns out your interest rate is too high, next week you refinance lower and if it turns out its lower, the other guy is stuck with it.”
All real estate markets are cyclical. The economy goes through stages and housing follows it- buyer’s markets and seller’s markets. Right now, we’re nearing the end of a buyer’s market and about to transition back into a seller’s market. When this will happen… no one knows! But, if you’re considering getting in, now is definitely the time!
We are in the midst of the greatest transfer of wealth in our lifetimes. There could come a time (perhaps 10 years from now) when we all look back and regret not buying more real estate NOW! Warren Buffett, if he were younger and knew he was going to live in a place for 5-10 years or more, would load up on single family houses, fix them up, and rent them out.
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 now.”
Interview from CNBC’s Squawk Box- February, 2012