When Warren Buffett talks, people listen. In particular, the Oracle of Omaha gets investors’ attention when he issues his annual Berkshire Hathaway shareowner letter, a frank and enlightening assessment of the economy and investment outlook. What jumped out in this year’s letter released last week: Buffett is bullish on housing again, and he’s putting his money where his mouth is.

In his letter, Buffett notes that, “a housing recovery will probably begin in a year or so. In any event, it is certain to occur at some point.” He said that “home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates,” adding, as an aside, that “the third best investment I ever made was the purchase of my home.” The first two, he says, were wedding rings.

Consequently, Buffett told shareowners, he has made several strategic investments in the housing sector in recent months. Among these are five corporate acquisitions in the building components field, a $50 million acquisition of a brick manufacturer, a new $55 million roofing plant for Johns Manville, and $200 million capital expansion of his Shaw Industries carpet company.

“Buffett doesn’t spend money unless he thinks he’s going to make money,” Jeff Matthews, hedge fund manager and author of Pilgrimage to Warren Buffett’s Omaha, said in a recent interview. Matthews said Buffett’s housing bullishness is “interesting because that didn’t happen last year and didn’t happen the year before that.”

The legendary chairman of Berkshire Hathaway isn’t the only one suggesting a turnaround in housing may be at hand. The Wall Street Journal ran an article recently headlined, “Why 2011 May be the End of the Housing Crash.” The Journal gives a number of reasons as to why this may be the bottom, including the fact that housing is the most affordable it has been in decades.

Nationally, the cost of a house is the equivalent of about 19 months of total pay for an average family, the lowest level in 35 years, Moody’s Analytics says. Prices usually average close to two years’ pay, although that varies nationally.  At the peak, midway through the last decade, a home in Los Angeles, the Journal said, cost the equivalent of 4.5 years’ pay. The average price has since fallen to just over two years’ income now. That’s well below its pre-bubble average of 2.6 years.

“Pricing is down so much in some markets that when you analyze renting versus owning it makes much more sense to own,” says Michael Larson, a real-estate analyst at Weiss Research in Jupiter, Fla.  Such analyses are “definitely bullish,” the Journal said. “Housing prices will probably bottom in 2011,” agreed Scott Simon, a managing director at money-management firm Pimco in Newport Beach. His views are important because Simon foresaw the housing crash, helping his firm dodge losses that plagued Wall Street.

The Journal also points out that investors are stepping up to buy real estate, which is usually another sign that the market has bottomed out or is near a bottom. In some instances, they’re paying entirely in cash. “That’s a far cry from the heady bubble days when borrowed money seemed the key to riches,” the paper reported.  “It’s a sign that these investors are betting on a rebound.”

What to make of all this? It gives reason for optimism that the real estate market in general – and the Colorado market in particular – may see much brighter days in 2011. As the economy continues to mend, it’s reasonable to expect some of the greatest economic gains will be seen locally thanks to diverse economic makeup. That bodes well for the local housing market.

Below is a market-by-market report from local offices:

Boulder — While new listings are down for the two week period by 12%, the Boulder office saw an increase in listing inventory.  Active backups and pendings saw a very slight decrease over the two week period.  Closings saw the largest decrease, however the first two weeks of February close 66% of the transaction closed during the heavy closing period of the month ending two weeks previous period.  This indicates more closing volume in February 2011 when compared to the previous month.

Colorado Springs — The market has been slow the past few weeks.  Showings have dropped 20% with very few showings on the weekend.  This is a surprise because showings were strong throughout January.  Sales have also slowed down with most buyers not wanting to go under contract with a house that is listed as a short sale.  Listings have also decreased as most sellers are waiting until spring to put their homes on the market.

Denver Central — Ativity is still doing very well.  The number of contracts written has nearly doubled from the two weeks previous.  Listing inventory has picked up however, and has tripled from two weeks before.  The number of buyers is increasing but so is the inventory.

Evergreen — Two new listings went on the market so far in February.  Listing inventory has started to increase as both new sellers as well as past sellers are beginning to put homes on the market.  Four listings went under contract and six buyers have been put under contract for the month to date.  Showing activity has been impacted by severe cold & snowy weather during the first two weeks of the month with only 70 showings for the month to date.  Activity has been in all price ranges, including two buyers under contract on properties in excess of $500,000 and on all property types; single family homes, condos & vacant land.

Longmont — Anyone have a magic crystal ball to tell the future?  Now, more than ever the housing market is local, local, local.  There are price increases in one subdivision and price decreases in another subdivision.  Short sales continue to make the market stats move dramatically in a short period of time.  Most short sales and bank owned properties are subject to multiple offers.  If being one in a number of competing offers and waiting for the “bank” to reply is not in your home buying strategy, look at the well priced & usually well maintained homes that are also on the market.  Great deals are out there.  Now is the time to put your home on the market & beat the Spring rush!

North Metro — There was a slight decrease in activity during the month of January but it is picking up in February.  Could be due to the frigid cold weather?  Agents continue to list around 30-80 homes per month with a slight decrease in the number that are in a short sale situation.  Activity at open houses is picking up as is the number of floor calls coming into offices.  The average sales price is $261,000 at this time, however, there is an increase in the number of Luxury homes ($500,000+) beginning to sell.

Southeast Metro — Nearing the end of February, things are very busy at the SE Metro office.  Not only have showings increased, but open houses have had more visitors & sellers are realizing that it is time to get their homes onto the market before they have more competition with other homes.  With the little bump in interest rates seen last week, it has prompted some buyers to get out there & look at homes sooner rather than later.  Thus the surge in activity.  Now is the time for sellers to be doing all of the maintenance items & sprucing up of their homes in anticipation of a quick sale once they get their homes listed.  This spring promises to be a busy time for all.

Parker – What a difference 2 weeks can make. Listing inventory has increased since many sellers took advantage of the nicer weather and put their homes on the market. But the buyer activity has increased even more. Showings are up 67% over the prior couple of weeks! More and more neighborhoods are holding their value and if this trend continues a flat market could be attainable this year. However, precaution is wise as the banks still have their shadow inventory.  Now is the time to list and avoid competition. It is also a great time to buy before interest rates and values go up again!

Denver West — Denver West agents are still listing and selling many short sale properties.  The odds of closing has increased tremendously with the use of a short sale negotiating company.  Nice weather increased attendance at open houses.  Many buyers are taking every relevant step towards a successful purchase.

Conifer — There have been three new listings so far during the month of February.  Inventory has stabilized as fewer homes are being withdrawn and both new and past sellers are beginning to put homes back on the market.  Showing activity continues to increase with 51 showings this month despite several periods of cold and snow.

Loveland — The winter deep freeze experienced did not help home showings or sales BUT the good news is that the usual Colorado winter weather has returned.  It is safe to go house hunting again!  There are buyers who are looking and looking and looking & are not finding what they want right now.  They are looking for well maintained homes priced competitively.  Now is the time to list your home.  Short sales and bank owned properties are still having an impact on the market in certain locations.  Investors are buying in the market…a good sign for all of us.

That’s it for now. Have a good week!

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