Ron Peltier, the executive building
Berkshire Hathaway Inc. (BRK/A)’s real-estate brokerage by acquisitions,
said he expects a rebound in U.S. home sales as banks liquidate
seized properties after settling foreclosure-misconduct claims.
Transactions (HSANEHSL) will probably rise to about 5 million this
year from 4.3 million in 2011, Peltier, chief executive officer
of Berkshire’s HomeServices of America Inc., said yesterday in
an interview. Existing-home sales will get a boost from lenders
like JPMorgan Chase Co. and Bank of America Corp., which in
February resolved claims of abusive foreclosure practices
brought by states and the federal government, he said.
“The banks still have very large numbers of distressed or
foreclosed real estate inventory,” Peltier said. “They are now
going to be making those properties available, and given the low
inventories across markets, it’s probably a good time to be
selling.”
Bank of America and New York-based JPMorgan were among five
banks that agreed to pay $25 billion to end probes by state and
federal authorities. The deal should lead to an increase in
foreclosure filings, which fell in the first quarter to the
lowest in more than four years, according to Irvine, California-
based data firm, RealtyTrac Inc.
Berkshire, led by Chairman and CEO Warren Buffett, is
adding to housing-related businesses as the company prepares for
an eventual end to the slump. Minneapolis-based HomeServices
agreed in the last two months to buy brokerages in Connecticut,
Oregon and the state of Washington. Peltier said he will seek
further deals and plans to enter the Northern California market
within two years.
‘Show a Pulse’
“It’s good timing because the market is, as we said,
finally starting to show a pulse,” Peltier said.
Competitive bidding, which has been largely missing from
most parts of the U.S. residential market, is prevalent from
Seattle and Silicon Valley to Miami and Washington D.C. where
the supply of homes listed for sale has shrunk. The inventory of
homes is close to a six-year low.
Buffett, 81, erred in early 2011 when he predicted a
housing recovery would begin within a year or so. The market is
“healing,” Buffett said in a February letter to Berkshire
investors, as buyers forming households are reducing the stock
of properties for sale.
“There’s virtually a dangerously low inventory of existing
homes,” Peltier said. “It is not a bull market, but it is a
very, very solid market.”
‘Incredible Value’
Sales (ETSLTOTL) of previously owned houses held in February near an
almost two-year high, the National Association of Realtors said
March 21. Purchases fell 0.9 percent to a 4.59 million annual
rate from a revised 4.63 million pace in January. The
association’s projection for home sales in 2012 is 4.65 million,
spokesman Walter Molony said in an e-mail today.
Of all purchases, cash transactions accounted for about 33
percent of the sales. Distressed sales, comprised of
foreclosures and short sales, in which the lender agrees to a
transaction for less than the balance of the mortgage, accounted
for 34 percent of the total.
“An unbelievable number of transactions are cash,”
Peltier said. “They’re bought by investors seeing the
incredible value today of home prices, and they can rent them.”
Last year, Berkshire’s Acme Brick acquired a Montgomery,
Alabama-based company for $50 million. Berkshire’s carpet-maker,
Shaw Industries, bought an artificial-turf maker that offers
putting greens for private residences.
Operating income at HomeServices advanced 41 percent last
year to $24 million as the company cut expenses. Operating
revenue dropped about 2.7 percent to $992 million on a decrease
in average home prices.
To contact the reporters on this story:
Andrew Frye in New York at
afrye@bloomberg.net;
Prashant Gopal in New York at
pgopal2@bloomberg.net.
To contact the editors responsible for this story:
Dan Kraut at dkraut2@bloomberg.net;
Daniel Taub at
dtaub@bloomberg.net
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