Every once and a while Warren Buffett comes out with a one line comment, which clearly summarizes in what direction we are heading. These defining comments are always hard to find as it is like looking for a needle in a haystack, in a farm full of haystacks.  Since I try to read everything I can that comes out about him, I usually catch these defining moments. Last month I was re-reading some Berkshire Hathaway annual reports, when I found this:

"If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you." - Warren Buffett -2013

This statement alone signals that the man is "Bullish" right now and that it would be smart to follow him as I did back in 2007 when he started worrying.

"This is sort of an economic Pearl Harbor we're going through" - Warren Buffett -2008

I was already 100% in cash by this time, but after reading this statement I called everyone I knew at the time and told them to go to cash as well.

Warren Buffett has been ramping up on Main Street for some time now and amazingly he has been buying Real Estate Brokerage businesses as he outlined in a recent Berkshire Hathaway Annual Report.   

BERKSHIRE HATHAWAY INC.

REAL ESTATE BROKERAGE BUSINESSES

Alabama

RealtySouth  

Roberts Brothers Inc.  

Arizona

Long Companies  

California

Guarantee Real Estate  

Prudential California Realty  

Connecticut

Prudential Connecticut Realty  

Florida

EWM REALTORS

Georgia

Harry Norman, REALTORS

Illinois

Koenig & Strey Real Living  

Iowa

Iowa Realty  

Prudential First Realty  

Kentucky

Rector-Hayden REALTORS

Semonin REALTORS

Maryland

Champion Realty Inc.  

Minnesota

Edina Realty Minneapolis

Missouri

Carol Jones REALTORS

Reece & Nichols

Nebraska

CBSHOME Real Estate  

HOME Real Estate  

Woods Bros. Realty  

North Carolina

Prudential Carolinas Realty  

Prudential York Simpson Underwood Realty  

Prudential Yost & Little

Ohio

Huff Realty  

Oregon

Prudential Northwest Realty Associates  

Rhode Island

Prudential Rhode Island Realty  

Washington

Prudential Northwest Properties  

That’s correct, 26 real estate agencies!

Home Ownership is the ultimate generator of consumer spending because when you buy a new house you have to, in most cases,  have to buy a new washer & dryer, refrigerator, pots, pans, dishes, furniture, towels etc. For those who buy older homes like I do, you need all kinds of home improvement stuff and added all together, these items add up and get the economy moving. Since consumer spending is 70% of our economy here in the United States, Mr. Buffett’s actions over the last few years have got me interested in the industry.

Following Mr. Buffett’s lead I went to work analyzing all areas of the Real Estate/Home Builder Industry, but alas I could only find one company that really stood out from the rest and that would be Homebuilder NVR (NVR).

For those of you new to this type of analysis, you can read my introduction by going HERE

NVR, Inc. operates as a homebuilder in the United States. The company operates through Homebuilding and Mortgage Banking segments. It is engaged in the construction and sale of single-family detached homes, townhomes, and condominium buildings under the Ryan Homes, NVHomes, Fox Ridge Homes, and Heartland Homes trade names. The company markets its Ryan Homes and Fox Ridge Homes products to first-time and first-time move-up buyers; and NVHomes and Heartland Homes products to move-up and up-scale buyers. NVR, Inc. markets its products in Maryland, Virginia, West Virginia, Delaware, and Washington, D.C.; New Jersey and eastern Pennsylvania; New York, Ohio, western Pennsylvania, Indiana, and Illinois; and North Carolina, South Carolina, Tennessee, and Florida. It also offers various mortgage banking services to its homebuilding customers, including mortgage financing and title insurance brokerage, as well as performs title searches in connection with mortgage loan closings.  

Though NVR does business in various eastern states, its main operations are in the capital district of Washington D.C., which due to the ever expanding size of government, never seems to go into a recession.  With a very experienced management team at the helm and a super track record for looking out for the stockholder, it’s hard to beat this performance:

What we clearly have here is a unique special situation and if the Real Estate market here in the US were ever to get back to full strength, then my estimated fully valued price for NVR Inc. of $1630.75 may be too low.  If Mr. Buffett is wrong (which he rarely is) then I still bought NVR Inc. stock at what I consider a bargain price and thus can wait patiently for real estate to recover.