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A construction worker cuts a piece of wood on the top of a home under construction at a new housing development in Petaluma, California. New homes sales have picked up, but in California, economists argue we still lack supply.
The Commerce Department released data on sales for new homes in the U.S. today. And the news is good — for the most part. We saw national sales at their highest level in two years, along with a nice bump the sales from April, up 7.6 percent.
What's driving this is tight supply and low mortgage rates, plain and simple. As Bloomberg reports, the number of houses on the market is at "record lows." However, fewer houses for sale are languishing in foreclosure and short sales (that's when the lender agrees to take a sale price for the house that's less than the total amount owed on the mortgage), and that's helping prices to get some much-needed support.
My feeling is that the news on prices is better than the news on sales — even news on sales of new homes, which implies some life in the beleaguered building trades and construction industries. We need to see a return to reliably, if modestly, ascending prices to achieve two things: get people who are currently underwater on their mortgages — but not by much — and current on payments back to even; and to re-establish the ability of borrowers to build equity in their homes so that first-time buyers can become first-time sellers and then second-time buyers.
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Warren Buffett, chairman of Berkshire Hathaway, attends the Allen & Company Sun Valley Conference.
Billionaire investor Warren Buffett released his annual Berkshire Hathaway shareholder letter over the weekend. As Marketplace's Heidi N. Moore reported on Monday, this is a much-anticipated and closely studied document. And as one of her sources pointed out, sometimes it's more interesting to focus on what went wrong in Buffett-land than on what went right — because Buffett provides engaging details on both outcomes.
For this letter, you want to zero in on the housing market, which in early 2011 Buffett figured would begin to recover in a "year or so." Wrong! Or to quote the Great Man himself: "dead wrong." Berkshire Hathaway has several housing-related companies in its portfolio, so Buffett would ultimately like to see the long-expected bounce-back. He's optimistic — because you can't fight human nature! Or more accurately, randy human hormones: