Legendary investor Warren Buffett’s conglomerate Berkshire Hathaway is reportedly considering unloading its real estate brokerage business.
The multinational has even engaged in advanced talks already with Compass Inc over a potential transaction, according to the Wall Street Journal.
While Gino Blefari – the chief executive at HomeServices of America has already refuted the WSJ report, the recent development has left investors wondering if the “Oracle of Omaha” has soured on the real estate industry.
Real estate industry is grappling with headwinds
The real estate industry has been having a hard time for quite some time in terms of sales weakness, limited inventory, and prices that refuse to ease much.
So, there may not be a clear signal from Warren Buffett yet that he’s throwing in the towel on that sector, but it’s not like he doesn’t have good reason to consider such a move either.
Bill Stone, the chief investment officer of Glenview Trust who has long been invested in Berkshire also agreed in a recent statement that the famed investor may consider selling if “he saw no future without consolidation.”
Note that Buffett unloaded his conglomerate’s newspapers business, which included Buffalo News and Omaha World-Herald for a similar reason in early 2000s after owning them for about three decades.
HomeServices is not a profitable business segment
Buffett counts HomeServices as a small part of his conglomerate holding company.
The segment contributed only 1.2% to Berkshire’s overall revenue of $371.4 billion in 2024.
In fact, the real estate brokerage business ended up losing $113 million last year, a massive decline from $13 million in net profit in 2023.
Back in the early 2000s when the legendary investor pulled out of newspapers, he said “if the competitive advantage disappears, if we really lose faith in the management, if we were wrong in the original analysis, we sell.”
That’s also making investors question if the real estate business today checks those boxes that newspapers did at the time.
Berkshire raises stakes in Japan’s trading houses
In the 2024 annual report, Buffett said limited “availability of homes for sale and high home prices” were hurting the conglomerate’s real-estate brokerage business.
The housing market in the US continues to struggle amidst higher mortgage rates. In January, pending homes declined further to a record low of 4.6%.
While the 94-year-old investor’s view on real estate industry hangs in the balance, he’s been raising stakes in the biggest trading houses of Japan.
In a recent filing to the country’s ministry of finance, Berkshire confirmed that it has increased stakes in Mitsubishi Corp, Mitsui & Co, Marubeni Corp, Sumitomo Corp, and Itochu Corp.
Year-to-date, the Class B shares of Berkshire Hathaway are up more than 15% at writing.
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