저자: MeetKevin · 외국인
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버핏의 버크셔 부동산 중개 자회사 매각 검토 소식을 계기로, 현재 주택시장은 가격보다 거래량 급감(고금리)이 문제이며 1980~82년 거래량 붕괴와 유사하다고 주장. 오스틴·플로리다 등 과잉공급 지역은 가격 하락 후 매수 기회가 될 수 있다고 봄. 로켓모기지·Redfin 합병을 긍정적으로 평가하고 로켓모기지 지분 일부 보유를 언급. 경기침체 시 거래량이 다시 200만 호 수준으로 떨어질 수 있다고 전망.
다듬은 글
Wow. Warren Buffett almost never sells any business. In fact, the last time he sold a business was a newspaper company in 2020 and a workers' compensation company in 2019. That's all. He rarely sells a business. Well, he has recently begun to consider selling, according to talks reported by the Wall Street Journal.
Berkshire Hathaway Home Services, the real estate agency. Yes, it actually used to be called Prudential Realty and then Berkshire Hathaway acquired it, so real estate agents across the country had to start writing Berkshire Hathaway Home Services California Properties instead of Prudential, for example.
It's the craziest naming convention they've ever had for this business . But hey, Berkshire Hathaway bought the brokerage business, which was a brilliant move because we 've seen real estate sales volumes explode, especially after the pandemic. Zero interest rate policies really contributed to this speculative boom in Airbnbs, vacation rentals, and real estate ownership without regard to valuation, especially market dynamics and how easy it is to build in certain areas versus others.
We'll talk about that in a moment. But this is a very interesting change for Buffett, because he doesn't like to sell properties or companies. He generally doesn't sell. He's the type who buys and maintains. Buffett, being 94 years old, has a lot of experience in the business world and many people wonder why he would be selling.
In fact, so much so that Barron's suggests Buffett hates selling anything. The sale of the Berkshire property unit would be unusual. What I've discovered with Buffett is that he generally doesn't like companies that are expensive now but have a declining trajectory. And, of course, this leads many people looking for lower housing prices to say, "Oh my God!
Does this mean a housing crash is coming?" We'll talk about that in a moment. But there is one type of real estate collapse that has already been happening. And it's a collapse and something very, very important for real estate agents. The volumes. This is, incidentally, the same thing that happened in the early 1980s.
I wish this graph went back further. Yes, indeed . But what happened in the 80s, and I'll show you this in a moment. What happened in the 1980s was that there was very high inflation at the beginning of the decade, and then came the double recession of 1980 and 1982 while the Federal Reserve was trying to fight to reduce inflation, and it took until 1985 for it to finally be under control.
And we were able to grow for about four to six years, depending on whether you want to count the brief stock market crash that happened in '89 or the general recession we had in '91. And then, of course, you had another boom of over 9 years until the dot-com bubble burst. So ups and downs in the markets are very, very typical.
But what happened in the early 1980s was not actually a collapse of the real estate sector. That is , in the selling prices. Yes, there was a savings and loan crisis at the end of the decade, but not at the beginning, which is the closest thing to the high interest rates we face now. Take a look at this chart.
You had a volume collapse. And again, you could only really see it here. I really wish I could show you the 70s because I'm convinced I'd be taller. But anyway, you had one of the lowest real estate turnovers ever recorded on this chart. Just under 2 million existing homes were transacted in the United States.
You can see here, during the pandemic era, we were at around 6 million homes on turnover, which was the highest we had seen since the speculative home-buying frenzy of 2005, you know, ninja loans, no income, no job, no assets, negative interest rate speculative loans . Oh, don't worry, you know , "marry the house, date the mortgage, you can always refinance," all that; All of those were just deceptive sales phrases to convince you to go into debt and suffer a downturn that ended in, you know, massive foreclosures and short sales and a total disaster.
2007 has characteristics opposite to those we have today. Today we have high interest rates, just like in the 1980s. So history tells us that this time will be no different. We have similar loans, like quality loans, just as we have in the 70s and early 80s, just as we do today with qualified mortgages.
And we have a high interest rate environment that depresses sales volumes, which is literally the opposite of what we had here in 2005, or even you could say in 2021, but not as bad because we still had qualified mortgages here. But in 2004 and 2005, anyone with a pulse could get a mortgage. There were no subscription standards.
Fannie, Freddie Mac, Ginnie Mae, you know, FHA loans, were sidelined in favor of conventional, or should I say commercial, loans that anyone could get, private loans, basically, you know, corporate loans. The difference I'm pointing out here is that today, most people who get a 30-year fixed-rate mortgage are getting a conventional-style loan backed to some degree by the U.S.
government through Fannie Mae, Freddie Mac, or whatever. In 2004 and 2005, if you study the history of this cycle, you discover that they were displaced by companies that said: "Ah, we will lend to you on whatever conditions you want." Well, that obviously led to a crazy bubble and a collapse. It's no surprise.
So, history actually shows us that volumes plummeted during the 1980-1982 era. And that same real estate collapse is actually happening right now. It's a volume collapse. It's not a price collapse. Now, many people are saying, "Oh well, it's only a matter of time before house prices fall." Well, house prices have already corrected in some areas.
If you look at the nation as a whole, you'll see that home prices are up 3% year-over-year compared to 2024, and are higher than they were in 2023 and 2024. And many of you who have followed me for a while already know this. There are certain markets like Tampa, several parts of Florida, Austin, Texas is a great example, where they had such a big bubble in 2022 that house prices have been negative year-over-year for each of the last three years .
Now, we've been talking about that on this channel. We saw that this would come from 2022 because we visited these markets and saw what was happening on the ground. The opposite is happening in areas like San Diego, where our company has a lot of exposure to real estate. But you can see that you have this increase in real estate value year after year.
Now, one of the reasons is that California has crazy policies that make it impossible to build houses, which does the opposite of creating affordable housing, whereas in Austin, Texas, you know, more Republican, more freedom. Basically, you can build as much as you want. Good. This led to an oversupply of housing.
So let's get to Buffett. What is this signal that Buffett is sending us? Well, I think Buffett is reacting to this. How do real estate agents, and therefore real estate brokerages, make their money? They make money from the volume. So, real estate brokerages become really popular when volumes skyrocket.
In fact, we just saw Redfin reach a tentative agreement to be acquired by Rocket Mortgage, which, I must say, I think is an absolutely brilliant move. These financial statements we have here, this is the Redfin Corporation. Redfin has an incredible market share when it comes to application data. Like people who want to go to Redfin to search for houses, to see properties.
They are really very good. They are not favorites in the real estate community because people see Redfin agents as competitors who undermine traditional agents. So, think of agents who work for, say, Berkshire Hathaway, California Home Services, or any other state, being undercut by Redfin, often salaried agents who, you know, work with a business model that's totally different from the traditional model of a real estate agent who is an independent contractor.
So, Redfin has been , in a way, a headache for real estate agents as a competitor. But many real estate agents have also had difficulty establishing relationships with a company like Rocket Mortgage, because Rocket Mortgage doesn't typically assign you a traditional lender to work with. Instead, you get a sort of assembly line of many different operators within the company and, well, they argue that they have a very efficient process, but you don't have that relationship .
Real estate agents rely heavily on relationships. That's why they like their lender, they like their escrow company, their title company. Redfin came along and turned everything upside down by saying, "No, we're simply going to pay our agents a salary plus a bonus." And on the other hand, you have Rocket Mortgage saying, "No, you don't need a relationship with a lender.
This person is really good at pre-qualification letters. This person is very good in the first 17 days getting the appraisal and condo servicing. This person is very good at closing deals, and they have specialized their lenders." So this idea of Rocket Mortgage and Redfin combining is brilliant, and I think it will become a huge powerhouse.
And I believe there is a great opportunity in owning shares of Rocket Mortgage; in fact, I have some exposure to them. But I have that exposure because I think it's an incredibly smart acquisition, and I actually think this works well when the market slows down and interest rates possibly fall, because we'll see more refinancing at both Rocket Mortgage and Redfin, which have lending businesses.
The thing is, you 're now merging those lending businesses with the power of the Redfin app, which is almost ubiquitous for home searching , and I imagine they could make it very easy to use the Redfin app to apply for a mortgage in the future. Do everything through the app. For me it's a brilliant acquisition, but Berkshire Hathaway, you know, going back to this, Berkshire Hathaway operates with a traditional model.
They operate with a traditional real estate brokerage model that has been altered in part by companies such as Redfin or Rocket Mortgage, but also by companies that offer real estate agents , such as eXp Realty, a 100% commission after a certain limit that they have paid to the broker. And so, margins in real estate have been under pressure from some of these more tech-savvy real estate companies , Redfin, eXp, whatever.
Perhaps some would even say Compass , although Compass is also a little different. And so, Compass is now interested in buying and potentially acquiring Berkshire Hathaway because this traditional model of selling real estate, I believe, is not only being disrupted by the eXp, Redfin, and Rocket of the world, but also by the collapse of these volumes.
And as these volumes continue to plummet, it becomes more difficult for these traditional businesses to make money. And I think that's why we see a possible acquisition by Compass to buy the real estate division, the brokerage, Berkshire Hathaway HomeServices of America. So to me, this is a sign from Buffett saying that we have a legacy business that is being innovated and we are simply not able to achieve that innovation, and we are also , in terms of time, potentially entering a worse environment.
Because, you see, people argue that home sales will rebound as interest rates fall, but that's not necessarily the case, because if rates fall to zero, it probably means we're in a deep recession. Well, look what happened after 2005. The value of homes, or not the value of homes. I mean, the value of homes was indeed affected in 2005 because it was a real estate crisis , whereas now we could have a more political and Wall Street-style crisis, you know, stock market valuations.
But either way, in a recession, volumes tend to go down. So volumes might only be at the beginning of their trend, and we could see sales volumes drop from this 3.4 million level back down to two million again, just like we saw in the 1980s. I always like to say that this time is no different. I do believe that some areas will continue to experience price pressure, but I really think that areas like Austin or parts of Florida could end up being a buying opportunity during the downturn in this upcoming recession or crisis.
So it's something to keep an eye on, and I love the idea of getting a good deal. In fact, I think Buffett is trying to exit near the peak in private equity valuations. I think Rocket Mortgage is getting an incredible offer with Redfin, because Redfin's stock has been absolutely destroyed. And I really think Rocket is getting a bargain here.
In other words, Rocket Mortgage has also been destroyed. But, I mean, look at this graph. You know, Redfin's stock reached as high as $96 during the real estate boom, and now it's at $10. And the only reason they're at $10 is because we went up from $5.82 due to the news of the acquisition. You know, this was a company worth about $700 million .
It was heading towards bankruptcy. I mean , I wasn't really going to go bankrupt. The company's profits. Yes, they were losing money. They had enough assets to compensate for this . Uh, but yeah, I mean, Redfin was a money-losing business. And right now, Rocket Mortgage is also losing a little money.
They usually do quite well in recovery. So, just look at that. You know, this real estate sector is full of hot potatoes right now. So, they want to be cautious in their investments regarding what they're looking for. Uh, if you're looking at mortgage companies, understand that they are a bit complex to analyze fundamentally.
That's because they have two things. They have mortgages they own and mortgage servicing rights. OK? Generally, when interest rates fall, mortgages increase in value. But they run the risk of losing some of those mortgages through refinancing, which means their mortgage servicing rights decrease, which is their ability to earn a commission for collecting that payment each month.
The advantage of a company like Redfin or Rocket Mortgage is that they expect to capture that refinancing activity. Currently, Rocket has about 12% market share. I believe that through this acquisition , they could probably increase that. So just understand the dynamic that right now owning real estate companies is very unpopular because volumes are low.
It's difficult to get loans. Many of these companies are trading at a discount, and that's why I think Compass is trying to buy this company or trying to buy Birkshare at a discount from Warren Buffett, and Buffett is looking at the trajectory and thinking that we can't innovate with this and that volume will probably fall further.
Let's just go out. Right now we're just burning money. It's smart, and it allows Buffett to raise even more cash for what he sees as more opportunities in the industry to buy cheap in many companies over time, especially if we end up entering a recession. Basically , he sold a good portion of Apple at its peak, so we'll see what he does, but...
When Warren does something, I like to pay attention and understand what's going on. Anyway, thanks for watching. If you like this analysis, feel free to subscribe. I'll keep you updated with more real estate ideas and do my best to give you a realistic analysis of what's going on. I know I could be walking around Texas or Florida right now and say that the entire housing economy is collapsing.
But we're focused on those overbuilt markets and areas that are now, to some extent, seeing a decline in population, which is very interesting for Texas or Florida . It's almost the opposite of what we saw during COVID, but that's a return to normalcy. It's not unusual. Anyway , thank you very much for watching.
See you next time . Bye bye. Good luck. Don't publicize these things y friend. You've done a lot. People love you. People admire . It 's always great to hear your opinion.
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