Business 4 min read By Alice Ashford
Berkshire's Greg Abel Bets on Homebuilders as Pending Home Sales Sit Near Record Low
Greg Abel, Berkshire Hathaway's incoming chief executive, is building a position in homebuilders while the Pending Home Sales Index sits near its second-lowest reading on record, down 36% since 2021. The bet raises the question of whether Berkshire is early to a housing recovery or simply early.
Greg Abel, the executive set to take over at Berkshire Hathaway, is placing a bet on America's homebuilders at a moment when the housing market is scraping along the bottom of its post-pandemic range. The Pending Home Sales Index, a forward-looking gauge of transactions that have been signed but not yet closed, is sitting near its second-lowest reading ever recorded and has fallen 36 per cent since 2021.
The contrast is stark. On one side stands a conglomerate with a long history of buying into unloved sectors when prices are depressed. On the other, a housing market weighed down by mortgage rates that remain far above the levels that prevailed when the index last touched its highs. Pending sales are a leading indicator: they typically translate into completed transactions within one to two months, so a weak reading points to continued softness in actual sales volumes.
For Berkshire, the appeal of homebuilders rests on a simple cyclical argument. Builders are among the first companies to feel a recovery when demand returns, because they control inventory and can adjust pricing and incentives quickly. Their shares have historically rallied well before broader economic data confirm a turn. Buying now, while sentiment is poor, fits the template that built Berkshire's reputation under Warren Buffett: acquire or accumulate when others are retreating, and accept that the timing may look premature for a while.
The risk is equally clear. A 36 per cent decline in pending sales since 2021 is not a minor dip. It reflects an affordability squeeze that has pushed many would-be buyers out of the market and left existing homeowners reluctant to move because they would have to trade a low fixed mortgage rate for a much higher one. That lock-in effect suppresses both supply and demand, and it can persist for years rather than quarters.
Abel's move therefore amounts to a wager on mean reversion. If rates ease and household formation continues, the release of pent-up demand could be sharp, and builders with land positions and balance sheets strong enough to survive the trough would be positioned to benefit. If rates stay elevated, the same builders could face further pressure on margins and order books, and Berkshire's stake would look early rather than prescient.
The question of whether Abel is early to a housing recovery or merely early is not academic. Berkshire's size means that any meaningful position in the sector is likely to be scrutinised as a signal about the direction of the US economy, not just as a stock pick. Homebuilding is a cyclical industry tied to employment, credit conditions and consumer confidence, and it sits at the intersection of the business and policy forces that shape the wider market.
For now, the data offer little comfort to anyone hoping for a swift rebound. The pending sales index remains close to its weakest level on record, and the gap between current activity and the 2021 peak is wide. Abel's bet will be judged by whether that gap closes, and by how long Berkshire is prepared to wait.
