5 Reasons Why Berkshire Hathaway Invested in Top Home Builders in the US

The US housing market is facing a shortage of affordable housing and limited supply. The current supply is 1 million homes, while the normal demand is 1.5 million homes, a 40% shortfall.

Home builders are carefully managing their capital allocation and tightly controlling supply and inventory levels.

Increasing stock repurchase and dividend

Very low leverage: Home builders have very low leverage. For example, the industry leader DHI has only 11% leverage in its homebuilding division.

Home builders are currently trading at a reasonable valuation, with a price-to-earnings (PE) ratio of less than 7x and an enterprise value to operating cash flow (EV/OFC) ratio of 6x.

Increasing new home orders: New home orders are increasing significantly, up 37% in Q3 2023 for DHI.

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