Appearing live on CNBC’s Squawk Box, Buffett tells Becky Quick he’d buy up “millions” of single family homes if it were practical to do so.

If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks.  He advises buyers to take out a 30-year mortgage and refinance if rates go down.

Buffett revealed that he put 175 million euros into each of eight European stocks on behalf of Berkshire Hathaway at the end of 2011, but did not reveal the names of those stocks.

He also said Berkshire bought just a “few” shares of IBM[IBM  197.76        ] this quarter.  He would have bought more but the price went up.  Buffett tells Becky he probably won’t buy a tech stock again, but if he understood a company and liked its management and price he wouldn’t rule out another tech purchase.

Buffett says if he could only own one bank stock it would be Wells Fargo  [WFC  Loading...      ()   ] and Berkshire also added to its position in that stock during the current quarter.

On Bank of America [BAC  7.88        ], Buffett says the bank’s deposit base is a “huge asset” and CEO Brian Moynihan has done exactly what he would do.

He does have some criticism for another Berkshire stake: Johnson & Johnson [JNJ  64.46        ].  He believes too many mistakes have been made at the recall-prone company and while it is still attractive at its current price, he would sell some shares if he needed to raise capital.  It’s “obviously messed up in a lot of ways in the last few years.”

Buffett on CEO Succession

Buffett defends Berkshire’s decision not to disclose the name of the person the board has chosen to be his successor as CEO, saying he has invested in many companies where he didn’t know who would be the next person running the company.

He does say the next CEO is “probably the CEO of some operation” within Berkshire.

Many people had interpretedSaturday’s letter to shareholders as saying the board had only decided last year on a CEO successor, but Buffett tells Becky the board has actually known for years who it would go to if Buffett were suddenly unable to continue at the helm.   That person, he says, has remained the same for more than a year and wasn’t former Berkshire executive David Sokol.  Answering a viewer’s question, Buffett says the successor doesn’t know he or she has been chosen by the board, and it isn’t a board member.

Buffett says Berkshire is required by law to pay Sokol’s legal bills, spending $1.4 million so far.  He “assumes” something is happening with the SEC’s investigation into whether Sokol was insider trading when he bought shares of Lubrizol before Berkshire announced its acquisition of the company.

Buffett on the Economy

Aside from the housing sector, Buffett says the U.S. economic recovery is healthy and won’t be derailed by rising oil prices.  He repeated what he’s been saying throughout the recession, that it’s always been a “terrible mistake” to be pessimistic on the U.S. over the long term.

Buffett says that except for its housing units, Berkshire’s businesses have increased their hiring and that each business will have more employees at the end of this year than they did at the start.

But for the nation, he wouldn’t be surprised if the unemployment rate returned to nine percent.

Buffett says that in “hindsight,” he now thinks the government’s bailout of the U.S. automakers was one of the best things to happen to the economy.

Buffett on New Portfolio Managers

Buffett heaped praise on the two Berkshire portfolio managers he’s hired, Todd Combs and Ted Weschler.  He says Combs did extremely well with his investment choices in 2011 and has been compensated accordingly.

While he’s not actively thinking about hiring a third manager, Buffett says he won’t rule it out if a great person comes along.

Buffett on Taxes

On taxes, Buffett says it’s a myth that U.S. corporations are paying anything close to a 35 percent tax rate and maintains those taxes are not “strangling” American competitiveness.

He dismisses suggestions by critics that if he wants the super-rich to be taxed at a higher rate then he should write a check and make a voluntary donation to the Treasury.  Buffett responds that contributions aren’t going to solve the massive debt problem facing the U.S.

He says it is a “travesty” that everyone else is being asked to make sacrifices but not America’s most wealthy people.

While he would accept Joe Kernen’s suggestion for a tax on a person’s total wealth, he says he doesn’t think that’s the best way to go, in part because it’s hard to value assets like farms.

He also says he would accept taxing dividends at the higher ordinary income tax rate, depending on what that rate would be.

In response to a emailed question from a viewer suggesting he owes it to Berkshire shareholders not to antagonize people by pushing his controversial views on taxes, Buffett says he doesn’t think a CEO needs to put his or her political beliefs into a “blind trust.”

He’s also calling on Congress to vote this year on the Bowles-Simpson fiscal reform proposals.  Buffett dismisses the idea that Congress can’t get anything done in a presidential election year, saying they shouldn’t be paid for the year if they’re not going to do some work.

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By Lucia Mutikani

WASHINGTON | Wed Feb 22, 2012 5:03pm EST

(Reuters) – Home resales rose to a 1-1/2-year high in January, pushing the supply of properties on the market to the lowest level in almost seven years in a hopeful sign for the housing sector.

The National Association of Realtors said on Wednesday existing home sales increased 4.3 percent to an annual rate of 4.57 million units last month, the fastest pace since May 2010.

It was the latest indication the housing market may be coming off the floor. While economists attributed some of the rise to unseasonably warm winter weather, they also said it signaled genuine improvement.

Sales were up across all four regions of the country, with the West recording the biggest gain — an 8.8 percent increase.

“At least some of the improvement in the last few months could have reflected milder winter weather, but for the most part, it seems that the housing sector may have turned the corner,” said Guy Berger, an economist at RBS in Stamford, Connecticut.

The tenor of the report was weakened somewhat by a sharp downward revision to December’s sales data to show only a 4.38 million unit sales rate rather than the previously reported 4.61 million unit pace.

A brightening economic outlook, marked by a strengthening labor market and buoyant factories, is giving the housing market some lift. Confidence among homebuilders is near five-year highs and they are breaking more ground on new housing projects.

Residential construction is expected to contribute to growth this year for the first time since 2005.

Robert Toll, executive chairman of luxury homebuilder Toll Brothers, welcomed that progress even as his company announced a surprise quarterly loss on Wednesday.

“Since the new home industry is coming off several years of historic low levels of production, we are encouraged by the recent improvement,” he said in a statement.

The data did little to lift U.S. stock market sentiment, with shares ending down after weak data on European business activity. Prices for U.S. government debt rose on concerns Greece might not be able to avert a messy default even with a fresh bailout.

The dollar rose against a basket of currencies.

INVENTORY DWINDLING

The U.S. housing market had been held back by an overhang of unsold homes, but steady sales gains are helping to whittle down supply.

The inventory of unsold homes on the market fell 0.4 percent to 2.31 million last month, the lowest since March 2005. That represented a 6.1 months’ supply at January’s sales pace, the lowest since April 2006 and down from 6.4 months in December.

A supply of six months generally is considered ideal.

While inventories tend to fall in winter and the decline last month could also be reflecting delays in the process of bringing foreclosed properties to the market, there is some real improvement underway.

The homeowner vacancy rate, which is closely correlated to the month supply, fell to 2.3 percent in the fourth quarter of 2011 from 2.4 percent in the prior three months. The rate peaked in 2008.

“This vacancy rate is consistent with a glut of about a half a million houses,” said Patrick Newport a U.S. economist at IHS Global Insight in Lexington, Massachusetts.

“At the current pace, eliminating the overhang should take less than two years, but will probably take longer, because it is concentrated in a few high-unemployment states.”

The median home sales price in January fell 2 percent from a year ago to $154,700. That was the lowest since November 2001. Other data on Wednesday showed demand for home purchase loans fell last week, despite mortgage rates holding near historic lows.

The Federal Reserve, which has suggested a number of ways other policymakers could step in to help the beaten-up market, is considering purchasing more mortgage-backed securities to drive mortgages rates even lower.

But some economists are skeptical that would do much good.

“I don’t think the problem in the mortgage market is high interest rates or availability of liquidity. The problem is lack of jobs and very strict lending standards,” said Sung Won Sohn, an economics professor at California State University Channel Islands.

Distressed properties, foreclosures and short sales, which typically occur at deep discounts, accounted for 35 percent of overall sales last month, up from 32 percent in December.

A third of pending existing home sales contracts were canceled, the NAR said. Investors bought 23 percent of homes in January, with first-time buyers accounting for a third of the transactions.

“We expect the spring selling season to show some improvement, but we believe it risks disappointing relative to market expectations,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch in New York.

(Editing by Chizu Nomiyama)

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By Morgan Housel | More Articles
January 23, 2012 | Comments (12)

Last month, Yale economist and housing expert Robert Shiller told me that we should be prepared for the possibility that home prices could decline in real (inflation-adjusted) terms for several decades. It’s happened before, and it will probably happen again.

But there’s an important distinction to make here. Housing prices could stay flat or decline, but housing construction increasingly looks like it’s not only near a bottom, but ready to snap back. That’s important, because housing construction tends to be a big driver of economic growth. From 2003 to 2006, construction accounted for over a quarter of all economic growth. Since 2008, it’s dragged economic growth down by over 9%.

A few things to keep in mind: The housing bubble that caused the mess we’re in wasn’t brought about just by inflated prices, but by a massive overbuild. Because prices were so high and credit so easy to come by, homebuilders had a huge incentive to build as many homes as they could. The result was epic: From 2001 to 2006, 11 million homes were built in the United States, but only 8 million new households were formed.

To compensate for that binge, new home construction utterly fell off a cliff in recent years:

Source: Federal Reserve.

That drop in housing construction is a big part of why the economy has been so slow. It’s not just construction jobs that get whacked when housing dries up. Everyone from mortgage brokers to Home Depot staff to furniture salesman suffer as well. And as all those workers get laid off and stop spending money, the pain moves down the economic ladder. It’s an ugly cycle.

But there’s evidence that it’s starting to turn around.

Rental prices on apartments are rising briskly, and rental vacancies have dropped like a rock to the lowest level in over a decade. Apartment rental rates in several metropolitan areas are rising at double-digit rates, and nationwide are expected to rise between 4.5% and 5.5% this year. When I signed a lease on my current home of Seattle in 2009, I felt like I could negotiate nearly anything I wanted. When I renewed a few months ago, I could barely get a word in — it was “take it or leave it.” The rental vacancy rate, which was as high as 8% in 2009, is now just 5.2%, according to housing data firm Reis. Even when the economy was booming, the vacancy rate stood at or near 6%.

As more young households that had been discouraged from owning a home suddenly become even more discouraged from renting an apartment — and as developers receive the demand to build more apartments — construction should rise.

And it looks like it already is rising. While 2011 saw the lowest level of housing starts since the Census Bureau began collecting data in the 1950s, the numbers are bouncing back ever so slowly. After bottoming at an annual rate of 480,000 in 2009, housing starts have now rebounded to around 660,000, and are expected to total over 700,000 this year.

The numbers have to eventually rebound — and sharply. Housing construction is at the lowest level it’s been in a half-century, but even that figure doesn’t show how depressed the industry is. When you adjust housing starts for population growth, you get a better understanding of how abandoned the industry has become:

Sources: Federal Reserve and author’s calculations.

Keep an eye on the y-axis. Since 1959, housing starts divided by U.S. population has averaged around 0.006. Today, it’s 0.002. Think of it that way, and it’s not a stretch to think that housing construction could eventually rebound threefold, maybe more.

The question is: When? And while it’s impossible to predict this stuff with any precision (if at all), I have a feeling we’re closer to the bottom than some assume. Between housing starts being unsustainably low, low vacancies pointing to pressure in the rental market, and housing numbers already starting to perk up, it looks like the tide has turned.

Several things could pull the market back into decline. There’s still a large number of homes waiting to be sold either by banks holding foreclosed properties or by homeowners waiting for a better price to sell. If this number — called shadow inventory — is larger than we expect, the market could face another leg down. And if unemployment rises or the economy slips back into recession, that too could send the industry back down.

But I think the most likely outcome is that housing will make a noticeable turn within the next year or two. That could be great for the economy, and great for companies like KB Home (NYSE: KBH  ) , MDC Holdings (NYSE: MDC  ) , and Meritage Homes (NYSE: MTH  ) — all three of which I’ve given a green thumbs-up to in my CAPS account.

Disagree? Tell me why in the comments section below.

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Severe price declines have spread to Dallas, Denver, Minneapolis and Cleveland, which had mostly withstood the bust in housing since 2006. The damage has now gone well beyond cities hit hardest by unemployment and foreclosures, such as Phoenix and Las Vegas.

“We didn’t enjoy the highs and the lows like other cities,” said Kay Weeks, a Realtor with Ebby Halliday in Dallas, where prices fell nearly 1 percent in March and are expected to keep falling. “But when we get bad news nationally, people take notice and cut back on spending and buying homes.”

Original posting.

San Francisco (No. 1), Boston (No. 2) and Denver (No. 3) top the list, while Tampa (No. 50), Providence, RI (No. 49) and Memphis (No. 48) rounded out the rankings. The biggest difference? Researchers say burgeoning art scenes and a commitment to the environment helped propel San Francisco, Boston and Denver to the top.

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