‘American dream will continue to exist’: Warren Buffett’s successor is betting big on U.S. housing

Berkshire Hathaway, led by CEO Greg Abel, is doubling down on U.S. homebuilders despite the struggling housing market. Since Abel took over as CEO on January 1, Berkshire has made three major moves in the homebuilding sector. In late May, it acquired Taylor Morrison, the sixth-largest homebuilder in the nation, for $6.8 billion in equity and about $8.5 billion including debt.

Mungo Homes, part of Berkshire's Clayton Properties Group, acquired South Carolina builder McGuinn Homes in early July. Berkshire's stake in Lennar, America's second-largest homebuilder, nearly doubled in the third quarter, representing roughly 11% of the company.

Abel told CNBC’s Squawk Box that the Taylor Morrison deal reflects a long-term view of the U.S. housing market, stating that "the American dream will continue to exist." However, in the short term, the bets appear precarious. Lennar's shares have fallen 49.7% below their October 2024 high, and its stock has only increased by 44.2% since the end of 2019.

Lennar has been aggressively cutting net effective prices to keep sales moving, but this strategy has squeezed profits. The company's gross margin in its fiscal third quarter ended Aug. 31 was its weakest since 2009.

Homebuilding companies face challenges in the post-pandemic market, with demand cooling since the pandemic boom ended and affordability remaining stretched. Mortgage rates have also moved in the wrong direction, with the average 30-year fixed rate climbing above 7% in late September for the first time since January 2025. Abel acknowledged that this is a "bumpy road" for the industry and that they don't expect a quick recovery. However, Berkshire remains committed to its long-term investment in the sector.

While the market's recovery in homebuilders is uncertain, Lennar's CEO, Stuart Miller, stated that the sector has become more difficult since the last earnings call in June. The consensus analyst rating on Lennar is underweight, and several major quant funds have cut their positions. Despite the skepticism from Wall Street, Berkshire's stake in Lennar continues to grow. With the acquisition of Taylor Morrison, Berkshire is now America's fourth-largest site-built homebuilder behind D.R. Horton, Lennar, and PulteGroup.