Warren Buffett’s Berkshire Hathaway has committed nearly $1 billion to two of America’s largest homebuilders:
$800M in Lennar
$190M in D.R. Horton
At a time when mortgage rates remain above 6.5% and sentiment around housing is overwhelmingly negative, this move stands out. Many might ask: Has the 95-year-old “Oracle of Omaha” lost his touch?
But Buffett’s most famous principle offers a clue:
“Be fearful when others are greedy, and greedy when others are fearful.”
And today, fear dominates the housing market.
Why This Bet Matters
Buffett’s team isn’t betting on a housing crash. Quite the opposite: they see the market as having found a floor.
Two structural forces are at play:
1️⃣ The affordability crisis
Mortgage rates have hovered around 6.5 for nearly two years.
With a median home price of $435,000, a household now needs roughly $127,000 annual income to qualify for a mortgage under traditional lending standards (31% debt-to-income ratio).
That’s almost double the U.S. median household income (~$74,000).
The result? Millions of households are permanently priced out of ownership.
Out of 46 million renters nationwide, only 6 million can afford a median-priced home.
In California, the affordability gap is even wider: median monthly payments exceed $5,900, requiring income of $237,000, nearly twice the state’s average salary. Since 2020, the cost of ownership there has surged 82%.
For these families, homeownership is not delayed. I t’s off the table. And when buying isn’t an option, renting becomes the only path.
2️⃣ Builders no longer rely on individual buyers
This is where Buffett’s insight comes in. Builders don’t need individual families to absorb their supply anymore.
Over the past five years, homebuilders have discovered a far more reliable model: Build-to-Rent (BTR).
Instead of selling homes one by one to families, builders now sell entire neighborhoods in bulk to institutional investors who rent them out.
Why does this matter? Because it changes the economics of new housing supply:
Inventory has an exit: even if families can’t buy, institutions will.
Margins improve: BTR rents average $2,181/month, 10-40% higher than comparable apartments.
Stability increases: occupancy rates run close to 97%, far above typical rentals.
This model ensures that what looks like “oversupply” is not a risk to builders. It simply gets absorbed by institutional buyers and turned into cash-flow assets.
That’s why home prices haven’t collapsed, despite 20 consecutive months of rising inventory. Builders are no longer exposed to the same risks they faced in 2008.
Why Prices Haven’t Collapsed
Look at the data:
National housing supply stands at 4.7 months, still below the 6-month “balanced” threshold.
New home inventory is about 481,000 units, the highest since 2007.
Yet prices still rose 2% year-over-year in 2024.
The reason is simple: if families can’t buy, institutions will.
And that puts a floor under housing prices.
Why Now?
Just last week, Fed Chair Jerome Powell hinted that a rate cut could come as soon as September.
Once rates fall, mortgage costs will ease. Decades of pent-up demand could quickly ignite, pushing both home prices and transaction volumes higher.
Buffett isn’t waiting for that moment.
He’s positioning now, at what he believes is the market bottom.
This is not new behavior. For decades, Buffett has acted early, guided by the same principle:
“Be fearful when others are greedy, and greedy when others are fearful.”
The Investor Takeaway
Markets don’t wait. Opportunities only remain for those willing to act.
Buffett has already put $1 billion into Lennar and D.R. Horton, not on a whim, but because he sees housing as having bottomed, supported by institutional demand and a new business model for builders.
So the real question is no longer “Will prices crash?” It’s: In this new reality, will you be a buyer, a renter, or an investor?
Buffett is betting now because he sees the bottom. And individual investors do have a window too.
At Real International, we’ve secured exclusive year-end discounts directly from builder, pricing typically reserved for institutional buyers.
If you want to learn from institutional strategies and capture opportunities like these, connect with us today.