Locator: 51824BRK.
Lennar's market cap: $20 billion.
A rounding error, unless I made a basic error in arithmetic: it will be interesting to see where Lennar is five years from now. 26 million shares at $81 / share = $2 billion. Berkshire has $365 billion cash on hand. Huge headlines; hardly a rounding error. 2 / 365 = 0.5%. So, even if LEN triples -> 6 / 365 = 1.6%.
For me, housing:
- generational wealth transfer: a lot of old housing is going to become available as seniors downsize over the nest 30 years;
- financing: like McDonald's, I don't see a lot of foot traffic moving to homebuilders;
- margins: historically 11 - 15%; Lennar says it will give up some margins to move property; it's costing them a lot of money to hold unsold property; 11% on a homebuilding bet or 6% on Treasuries?
- declining birth rate;
- #1 reason for US population increase disappeared almost two years ago; we're starting to see that in rental rates and have seen that in used car prices for quite some time;
- not sure if I can find where homebuilders can cut production costs.
Demographics:
Millennials (Gen Y): Born 1981 to 1996, making them 30 to 45 years old.
The younger half of the 30–50 range belongs to this group.
Generation Z: Born 1997 to 2012, making them 14 to 29 years old.
Facts:
- Baby boomers (62 to 80 years old): downsizing; out of the housing market; their children won't move into their old homes.
- Generation X (45 to 61 years old): thinking about downsizing; regardless how much they want to buy, they are pretty much fixed in their current homes.
- Generation Y(millennials, 30 to 45 years old): prime home-buying segment; more on them below.
- Generation Z(14 to 29 years old): too soon to say but it will be nothing like the homebuying frenzy we saw after WWII by my parents' generation and my generation later.
Opinion:
Homebuying is not dead, but it certainly doesn't look like a growth industry. Technology is the growth industry -- technology as the "infrastructure" for everything else, and I just don't see much technology in homebuilding that would entice Generation Y (the 30- to 45-year-old group).Generations Z and Y are more interested in travel, experiences, job hopping, experimenting, way fewer children (perhaps zero).
Now, why I'm wrong and BRK is right: link here. Link: https://share.google/aimode/XVqnQeDLLxqrYfXVv.
Even more fun: a discussion -- link here. Link here: https://share.google/aimode/doTTVKlVGPkLO6a5D.
.************************
BRK Buys More Housing
