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hey guys Mike here so you might have noticed Warren Buffett made these three purchases and they're new to his portfolio and they are three home builders and you can see this is not small purchases about 800 million dollars worth almost six million shares of DHI which is Dr Horton and then you can see 11 000 MVR and about 153 000 in Lennar but what you might not know is this is his second big bet on the real estate industry and I'll show you what he did with the first one I'm talking about how well he did also show you why you purchased three of them and not just one Builder and also really why I think he's making this bet and so if we get into what he's probably looking at here guys it's simply this yeah U.S existing home sales we're not selling right almost 80 percent of people are sitting in rates below four percent at this point in time quite a few or something below three and you can see these are existing home sales which haven't been this low since like 2014 I believe it is and then you go over here nearly one third of four cell homes are new construction now and you can see I mean we've never seen anything really like this and so this is something new and so going forward if we're not selling and rates stay high for a long period of time and prices at home stay high for a long period of time or continue or actually shoot up even more who what are people gonna buy new homes well they ain't gonna have any choice so this number could actually increase don't be surprised on that what else is he looking at the total housing inventory it is in the toilet look at this that's 2010 until now and you're seeing a little hope that maybe it increases but these home builders can't build these houses fast enough to meet future demand and then when you look at this U.S homeowner vacancy rates look at where it's at it's you can't get no lower this goes all the way back into the 50s and look how low that is the lowest we've ever seen if you watch my channel I don't know if you've always got to say so a year or first right and this is another one that's the vacancy rate then you look at this right here earnings are following for these home builders but the fusion looks bright and if we look at the the main part of this right here with all three of these homeboats reporting declining earnings per share it seems hard to reconcile while home builders in general are faring well and why Buffett is interesting home building is a classic early stage cyclical which means it is one of the first Industries to emerge from a recession which by the way we have mineral session yet this didn't happen after the Great Recession because of excess inventory the excess inventory problem has now reversed and the National Association of Realtors estimates a housing gap of 5.5 to 6.8 million units to put that into perspective housing starts are running at 1.4 million unit pace so we got quite a ways to go before we get back to that and then you look at home builders got to build we can see they're actually slowing down the building it looks like because for a while there was happening they couldn't get wood it was too expensive brick any kind of uh item or commodity you try to build with was through the roofs they actually had to hold off which actually we did what to the inventory shrank it even more and so if they keep this pace up then obviously that's going to keep a supply constraint in place and the videos think about subscribing and so you can see what him and his firm is looking at right now the question is why did he buy three of them why not just the one and it's simply one don't put all your eggs in one basket and two these companies actually build in different areas and you can see he didn't actually you know pick scrubs here he picked the number one the number two and the number four Builders out there not sure why you didn't pick Pulte I'm sure you had his reasons for it and you can look at the 2021 total closings and see how many houses these folks sold and when you come over here you can see what is real estate it's regional right what's going on here in Florida it might be be totally different what's going on let's say somewhere in Nevada okay and these home builders you can see here's DR Horton they're like the biggest out there and they're in many many states right they have their own business model what prices they charge and everything like that but then when you switch over here and you go to NVR look at them they're only in 35 metropolitan areas in 15 states and all on the East Coast right here and then you go to the last one with Nar and they're sitting there and number one in market share position and many of these cities but also sitting at number two and all the cities to the right that you can see so they're nowhere in the midwest basically just west coast East Coast type folks somewhere in the South and so he's got all his bases covered to where these home builders are building because what happens again you have one red hot market and now there's a cold market right it depends on what's going on right now and so like in Florida it's a hot Market maybe somewhere in like I don't know Michigan and maybe the the real estate Market's a little bit cooler order and so I think that's one reason he did it but two look at these charts right these charts are all identical and what I mean by that is you're going to have two trend lines one short-term trend line one's a long-term trend line and then you got your moving averages and every one of these stocks ran up like crazy he bought about right in the middle right there but every one of them had broke their 50 moving average they all have three bounces off this long-term trend line which goes from 2020 right there and you can see this with the MVR again two trend lines broke the 50 heading to the hundred and then you look at this long-term trend line as we zoom out right here and you got three bounces they all look identical right go to Lennar last one broke the 50 heading to the 100 actually sitting on its hundred two trend lines one shorter term you got multiple bounces and then the longer term where you're sitting there with three identical bounces it seem like they moved together correct and then when you look at how much of a draw down they had to that long-term trend line they're all identical twenty six percent that there 25 there and you go to the last one and it's going to be the same thing around 26 so all identical charts they all move the same so he basically knows on the stock chart what's going to be happening to them but of course I like to do a little more digging and I found out this is not his first bet into the real estate industry He Did It Before the last run up to the 08 crash how did he do it he did it a little bit differently he goes out and he could see what was going to happen and so in 2000 what you do he buys a Furniture retailer because you have to buy furniture when you're going to own homes then what does he do in 2012 he goes out and he buys one of the biggest brick manufacturers out there and then after that in 2000 he goes out and also buys a commercial roofing company and then in 2001 he goes and buys Another Brick Company to add to his acne purchase and then lastly you got to go ahead and have flooring right so he goes out and buys one of the biggest carpet manufacturers there is out there and I'm sure you know the rest of the story it turned out really well for him because the real estate market started to Boom leading up in the 2006 2007 before we had this horrific crash so he made a killing and so now what is he looking at could be looking at this right here here was housing stars from 2000 2005.
that right there is a nice run-up okay a whole lot of carpets being sold a whole lot of roof being sold a whole lot of bricks to make them and a whole lot of furniture being sold so that was a good one right now what did you see happening over here to the right says well maybe we're fixing to get ready to go on another run right what else is he saying maybe United States new home sales well look what happened in 2000 2005.
heck of a time to own a brick carpet and roofing company right huge run okay and he looks to the right you think well maybe after a draw down we're getting ready to go ahead and go on another run and if he is right and you know Warren Buffett usually likes to be a little early on this then you know he can make a nice tidy profit all right and also just for Giggles you know he likes his dividends and of course DHI he which he owns almost 6 million shares and pays 80 cents a year and then Lennar pays about a dollar per share so he's collecting on the side which is pennies to him around 4.4 million I believe it is and dividends and so we'll have to see if this investment works out again Berkshire Hathaway tends not to be like an active investor where they're moving and out of positions every quarter so to me it looks like this is more of a long-term play to see how it plays out and stuff just with all the different factors playing right now which we've really never seen in the real estate market before and so let me know what you think down in the comments about that and stuff and again you know he likes to be early they usually hold you know long term and stuff again these stocks as I showed in the charts they needed to sell off they got way ahead of themselves okay and so now they're finally maybe starting to come in line we'll see uh when they get get a balance of stuff like that but you know again let me know what you think in the comments you think this is a good laundering play or not what do you think is going to happen to the real estate market because this is interesting time to save them least and so please hit that like And subscribe button if you got anything out of this really appreciate it and I will see you later foreign
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