Buffett's three choices for balancing the housing market · Transcript · BuffettMungerGPT

WarrenThe housing situation is pretty much this way. You can look at it this way. We create about a million 300,000 or so households a year. It bounces around some. But, and it tends to, in a recession, it tends to be fewer because people postpone matrimony and so on to some extent. But if there's a million 300,000 households created in a year and you create 2 million housing starts, annually, you were going to run into trouble. And that's what we did. We just created more houses than the demand was, the fundamental demand, was going to absorb. So we created an excess of houses. How much excess is there now perhaps a million and a half units? We were building 2 million units a year. That's down to 500,000 units a year. Now, if you create 500,000 units a year and you have a million, 300,000 households created, you are going to absorb the excess supply. It will be very uneven around the country. South Florida is going to be tough for a long, long time. So it isn't like you can move a house from one place to another if there's demand in one place and not another. But we are eating up an excess inventory now. And we're probably eating it up at the rate of 7 or 800,000 units a year. And if we have a million and a half excess, that takes a couple of years. There's no getting away from it. You have three choices. You could blow up a million and a half houses, you know, and if they do that, I hope they blow up yours and not mine, but that's it. We could get rid of it. We could try to create more households. We could have a 14-year-old start getting married and having kids, or we can produce less than the natural demand increase. And that's what we're doing now. And we're going to eat up the inventory, and you can't do it in a day and you can't do in a week, but it will get done. And when it gets done, then you will have a stabilization, and then you will create the demand for more housing starts. I mean, then you can go back up to a million and a quarter. And then our installation business and our carpet business and our brick business will all get better. Exactly when that happens, nobody knows, but it will happen.