Warren Buffett’s Berkshire Hathaway Invests Nearly $1 Billion in Homebuilding Giants

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Warren Buffett‘s Berkshire Hathaway has bought a major stake in two of the nation’s biggest homebuilders—Lennar and DR Horton—in a vote of confidence for the struggling residential real estate sector.

Berkshire’s new investment in the homebuilders was worth over $991 million. The Lennar stock was worth $800 million, while the DR Horton stake was significantly smaller, valued at $191.5 million.

Buffett’s company, based in Omaha, NE, announced the new holdings in a securities filing Thursday, reflecting the sizing and valuation of the stakes as of the end of June.

Shares of Lennar and DR Horton both jumped following the news of Buffett’s interest. Lennar stock is now up more than 7% from the start of the year, while DR Horton shares have risen 22%.

“Berkshire investing in homebuilding is a boost of confidence for new home supply in the U.S.,” says Realtor.com® senior economist Joel Berner. “The country is facing a housing shortage of nearly 4 million homes, and the only solution is for someone to build them. This move suggests optimism that the housing market will rebound and support new home sales, and it will help to enable builders to continue offering affordable inventory to the American homebuyer.”

With homebuilding sentiment faltering in August, builders have struggled to draw in buyers on the sidelines. Builders are trying to lure buyers with sale incentives like discounts or mortgage rate buydowns, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

“In further signs of a soft housing market, the latest HMI survey also revealed that 37% of builders reported cutting prices in August, down from 38% in July. The use of sales incentives was 66% in August, up from 62% in July and the highest percentage in the post-COVID period,” as per the NAHB.

Overall builder confidence in the market for newly built single-family homes was 32 in August, down 1 point from July. Anything below 50 reflects negative homebuilder sentiment about the market.

“Affordability continues to be the top challenge for the housing market, and buyers are waiting for mortgage rates to drop to move forward,” said NAHB Chairman Buddy Hughes. “Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.”

Berkshire Hathaway’s investment in homebuilders may suggest a long-term bet that current housing headwinds—such as affordability issues and high interest rates—are temporary. With the country facing a persistent housing shortage, the company could be positioning itself ahead of a future rebound in demand.

“The current housing slowdown is primarily the result of high mortgage rates, which many people hope will be coming down soon. With cheaper financing available, the hope is that we will see more home purchases made by buyers who have been otherwise relegated to the sidelines due to affordability constraints,” says Berner.

“Homebuilder stocks have been performing well in recent months, so this seems like a smart and timely investment,” he added.

Other new positions revealed in Berkshire’s quarterly filing include a $957 million stake in steelmaker Nucor and a $1.6 billion bet on insurance giant UnitedHealth.

Berkshire Hathaway has had previous experience with the homebuilding industry, acquiring one of the country’s biggest builders, Clayton Homes, which has grown to become a significant part of the company’s portfolio. Clayton Homes focuses on providing attainable housing options, including manufactured, modular, and site-built homes. Berkshire acquired it in 2003 for $1.7 billion.

Berkshire Hathaway’s business model mixes buying entire companies with investing heavily in public ones. Sometimes it takes full ownership and runs the business, though Buffett usually lets leaders manage independently. Other times, Berkshire buys large stakes in companies without control, focusing instead on long-term growth.

But the investment in homebuilding isn’t out of character for Berkshire, as its portfolio has already run the gamut—often diversifying the company through various acquisitions. For instance, it acquired Scott Fetzer Company, which owns reference and educational publisher World Book, as well as Benjamin Moore, a paint manufacturer, and Fruit of the Loom, a clothing and undergarment maker.

Even as short-term builder sentiment weakens, Berkshire Hathaway’s investment signals confidence in the long-term fundamentals of U.S. housing.