Alexandria, Virginia, United States, October 6, 2023 – Berkshire Hathaway invests in homebuilders, excluding PulteGroup; industry poised for growth. Famed investment firm Berkshire Hathaway, led by Warren Buffett, recently released an updated look at its massive stock portfolio.
The public learned that Buffett and his team added shares of three different homebuilders. Berkshire bought D.R. Horton (DHI), NVR (NVR), and Lennar (LEN), investing a combined $814 million. All three stocks outperformed the S&P 500 by a wide margin in the second quarter and these homebuilders have long track records of growth and attractive valuations.
Investors in homebuilder stocks noted that PulteGroup (PHM), a Fortune 500 company, was not among the shares that Buffett added to his company’s portfolio. Buffett has offered no comment on whether the recent lawsuits against PulteGroup CEO Ryan Marshall prevented Berkshire from adding PulteGroup shares during it’s recent homebuilder investment wave.
Homebuilders are winning because there are always some people who need homes and existing home inventory is extremely low. Millions of homeowners have mortgages with 3% or lower interest rates and don’t want to give them up. The average 30-year fixed mortgage has risen from 2.8% in February 2021 to 7.6% in August 2023. With homeowners reticent to sell, new homes are making up a higher than customary percentage of available homes on the market. Not only that, but homebuilders can offer incentives like promotional mortgage rates that other sellers can’t.
Berkshire’s portfolio managers also control stakes in housing-related businesses like Clayton Homes, Shaw, Johns Manville, Acme Building Products, Benjamin Moore, and MiTek, and may have even greater insight into the market. Since the onset of the Covid pandemic, home builders have accelerated construction to keep up with demand, but struggled with supply chain issues and labor shortages. With the pandemic at an end, home builders may finally be able to meet the rising demand in the market and send their stock prices soaring.
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