Warren Buffet says New Housing Starts Will Recover the Economy

We mention Time Magazines issue on Warren Buffett reports an optimistic view for the future of the USA economy. We recommend this article to you, especially his comments highlighted.

Buffett Optimistic about the USA's Economy

See the octogenarians thoughts on the U.S. housing market. It is a succinct analysis of what Buffett believes is the intricately linked relationship between housing starts and employment.

"Once we get back to a million housing starts per year”– the current tally is 685,000 — “I think pundits will be surprised just how fast unemployment will come down in this country,” he says. “There are 4 million people hitting age 22 every year in this country. Sure, you can double up on households for a while, but at some point, hormones kick in, and living with your in-laws loses its allure.” Buffett notes that nearly every one of his major non-housing businesses has had several strong quarters, and Berkshire companies are making a record number of investments, the vast majority of which are in the U.S. “I am 100% sure that people in this country will be doing more business 10 years from now than they are today.”

As we consider his words, I remember as a banker tracking every job created when a house is built. Our appraisal firm http://www.benboothe.comtracked the details. It is amazing. With every house there is a need for some worker or the following products to be purchased, and people hired to install them:

  1. Lot grading and earth-moving
  2. Surveying
  3. Appraiser
  4. Paving
  5. Architects
  6. Plumber
  7. Carpenters
  8. Painters
  9. Electricians
  10. Appliance installers
  11. Furniture
  12. Light fixtures
  13. Carpet
  14. Wall paper
  15. Glass installers
  16. Roofing contractors
  17. Insulation installers
  18. Air Conditioning and heating experts
  19. Landscapers
  20. Gardeners
  21. Fence builders
  22. Paving for driveway.

We estimate atminimum of 50 basicjobs are created for every new house built and that does not include manufacturing jobs for the appliances and products put into a home. Considerthis and a new house represents 85 jobs. On and on it goes for every new home built, with add ons such as new ideas from this generation, and evolving cultural demands such as internet connections, solar panels for energy savings, modern music and entertainment systems, organic gardening. All of these "cultural" or generational items add even more jobs. Our best guestimate is that you can calculate 100 jobs for every new home built in the United States.

With this in mind, the government has started several housing programs to encourage better terms and loan availability for the housing market. But, Buffet's view, that 4 million new people a year hit the age of 22, suggests a fundamental market force. The wife is going to want a nest, her "home". The king is going to want his "castle".