Warren Buffett on housing recovery

Obviously, the current housing downturn is still unpredictable, and subject to many influences in the larger national and world economies, but Warren Buffet has made a lot of money by being right in his forecasts more often than he has been wrong.  Bloomberg News reported yesterday on his recent report to Berkshire Hathaway shareholders:

Buffett Says U.S. Housing Will Recover by Next Year

“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.”

“High-value houses and those in certain localities where overbuilding was particularly egregious” will take longer to recover, he wrote.

As I have written separately, we may see a second wave of foreclosure activity in 2010 as interest rates reset for Alt-A and Option ARM mortgage products.  If housing demand weakens with the end of the current tax incentive programs, and if interest rates for new mortgage loans begin to edge upward this Spring and Summer, the supply of homes in many markets will continue to exceed demand.  By next year, though, the true market correction should be able to take hold.