An Unexpected Affirmation from Warren Buffett

Warren Buffett hasn’t been buying much lately – noting that the stock market has no bargains -- but apparently, he quietly has been loading up on housing stocks – placing big bets that housing is the strongest part of the economy going forward. So why is Warren Buffett putting so much money into the U.S. housing industry at a time in which he earlier declared that “the incredible period” for the American economy has ended and projecting lower net income for all businesses going forward?

Betting on Necessities

When Warren Buffett told his shareholders that the “incredible period” for the economy had ended, he could not have been more clear that a U.S. recession is approaching. Most economists expect the recession to be formally announced at the end of the second quarter of 2024. And in times of recession, the only businesses that do well are “necessities” – things that people cannot do without. These categories are founded on food and shelter. To invest in the U.S. housing market is a clear shift to betting on necessities over luxuries and a telltale sign that bad times are coming.

Banking on the Inherent Housing Shortage

Warren Buffett has always been a proponent of the concept of investing only in industries that have a “moat,” which protects them from competitors. And one of the largest “moats” in America is the numerous barriers to entering the housing business. It’s virtually impossible to build a single-family home today for under $250,000. That’s the new entry price for new household formation. And to even hit that number you have to build in a large scale, which only the publicly-held builders can perform. And even then you have to find land which has access to utilities and the zoning to build on, in just the right location where there is demand. Unlike the 1950s where you could build new neighborhoods virtually anywhere, the modern housing market is stifled with giant roadblocks and scarcity of available land and builders who can deliver on lower price points.

Knowing that Affordable Housing is the Key Sector

You have two main sectors of the housing industry: 1) luxury and 2) affordable. While the average single-family home in the U.S. costs $400,000, those buyers are predominantly Baby Boomers (born between 1946 and 1964) who use the sale of prior homes to fund the purchase. And for new households buying their first home, there is a very limited supply of homes at their affordability level of around $250,000. That’s the highest price a younger two-income couple can afford, needing roughly $100,000 in combined annual earnings to qualify for the mortgage. While the luxury housing market can be fickle – with Baby Boomers often deciding just to sit out upgrading their home – the younger and newer household formations don’t have that option. As a result, Buffett appears to be betting on the affordability sector of the single-family housing market because he knows that the demand will always be there, as will the “moat” on supply.

This Is a Repeat of 2003 for Buffett

Many investors have forgotten Warren Buffett’s big move in 2003 when he purchased Clayton Homes for around $1.7 billion. He knew that the affordable housing sector would always be hot and figured that mobile homes offered the lowest price-point in U.S. housing. He additionally purchased, as part of that transaction, Vanderbilt Mortgage and 21st Mortgage, which are the dominant financiers of new mobile home purchases. This pure-play on the most basic affordable housing product has worked well for Berkshire Hathaway and the latest purchase of single-family home stocks is simply a repeat of 2003.

How This Relates to Mobile Home Parks

When the storm clouds hit the U.S. economy in 2024, housing will be the lone bright spot. Buffett intends on being a big player in both the mobile home market as well as the single-family home sector. Buffett’s firm, Berkshire Hathaway, does not buy real estate because it does not have a REIT designation (which he has pointed out in many interviews) but if he did have the freedom to buy mobile home parks, he would. Anything housing related will be a winner in the looming crash, and mobile home parks represent the most affordable option in the U.S.


We have been writing for months now about how the U.S. economy is about to collapse into recession and how the housing market will be the sole survivor of this turmoil. We have long advocated affordable housing as a contrarian bet on a failing U.S. economy. And now it appears that Warren Buffett agrees with all of this and is making big bets and apparently affirming our logic.

Frank Rolfe
Frank Rolfe started his billboard company off of his coffee table, immediately after graduating from college. Although he had no formal training on the industry, he learned as he went, and developed his own unique systems to accomplish things, such as renting advertising space. Frank was formerly the largest private owner of billboards in Dallas/Ft. Worth, as well as a major player in the Los Angeles market.