Buffett, Brookfield venture into U.S. housing
Billionaire and Toronto-based company to manage a real estate network
NEW YORK — Warren Buffett’s Berkshire Hathaway Inc. is extending its bet on the U.S. housing market by forming a venture with Toronto-based Brookfield Asset Management Inc. as low interest rates, inventory and prices spur a real estate rebound.
Berkshire’s Home- Services of America Inc. unit will be the majority owner of the venture to manage a U.S. resi- dential real estate affiliate network, according to a statement on the new company’s website. The firms plan to offer a new franchise brand, Berkshire Hathaway Home Services, starting next year. Brookfield’s network has operated under the Prudential Real Estate and Real Living Real Estate brands.
Berkshire’s managers have been positioning the firm to benefit as the U.S. home market recovers from its worst slump in seven decades. The Omaha, Neb.-based company has bought a brickmaker, won the loan portfolio of bankrupt mortgage-lender Residential Capital LLC at auction and built its Home-Services unit by agreeing to acquire real estate brokerages in states including Oregon and Connecticut.
“We have significant inventory shortage across the country” and prices have fallen, Home Services chief executive officer Ron Peltier said in a phone interview. “When you add the pieces up together with low interest rates, we see a housing market that will continue to improve.”
Berkshire Class A shares declined less than 1 per cent in New York trading on Oct. 26 to $129,725 U.S. and have gained 13 per cent this year. Brookfield, based in Toronto, advanced 1.9 percent Wednesday to $34.90 and has surged 24 per cent since Dec. 31.
The agreement comes just days after another Berkshire subsidiary, Iowa-based MidAmerican Energy Holdings Co., inked a deal with Calgary-based TransAlta to build new natural gas-fired power plants in Canada.
Buffett, 82, said in July that the U.S. home market was beginning to improve. Berkshire’s billionaire chairman and CEO tracks economic activity, in part, by studying the results of the company’s more than 70 operating businesses including ones that build manufactured homes, make paint and sell insulation.
“It was just a question of getting households in balance with” the supply of homes, Buffett told Bloomberg Television’s Betty Liu in a July 13 interview. “That happens in different paces in different parts of the country, but you have seen a much better balance developing here in recent months. And that’s why you’re seeing some pickup in prices in places.”
Housing prices rose two per cent in August from a year earlier, the biggest gain since July 2010.