Buffett's "blessing" propels US real estate stocks to rise against the trend, undeterred by high interest rates.

The high interest rates have influenced some of the decisions made by American homebuyers, but at the same time, they have also limited the transactions of second-hand houses. However, this situation has been beneficial for builders, which has attracted the arrival of the "stock god".

This week, regulatory filings disclosed by Berkshire Hathaway revealed that the company has increased its holdings in DR Horton, the largest residential builder in the United States. In June of this year, Buffett also purchased two other builders, Lennar and NVR.

Since the beginning of this year, the stock prices of these three companies have risen by 21%, 27%, and 31% respectively.

Another builder, PulteGroup, which Buffett did not buy into, has seen its stock price soar by 70% this year.

So far, Berkshire Hathaway holds approximately 6 million shares of DR Horton, worth over $700 million, and holds positions in Lennar and NVR worth approximately $20 million and $70 million respectively.

The most aggressive interest rate hike cycle in forty years has led many new homebuyers in the real estate market to face higher housing financing costs. On the other hand, the rapid rise in interest rates has also prompted some existing homeowners who are considering changing homes to pause, reducing the inventory of existing homes for sale, and forcing new buyers to turn to purchasing newly built homes.

Robert Dietz, Chief Economist of the National Association of Home Builders, said that new homes typically account for 12% of the total housing inventory, but currently account for at least 30% of the entire market.

Donald Horton, CEO of DR Horton, stated in last month's investor update:

Despite the continued increase in mortgage rates and inflationary pressures, our net sales orders have increased by 37% compared to the same period last year, as affordable new homes and existing home supplies remain limited, and the demographic structure supporting housing demand remains favorable.

DR Horton announced better-than-expected third-quarter results last month: revenue increased by 11% to $9.7 billion, and net profit reached $1.34 billion. The company also raised its full-year sales forecast.

In fact, many American families typically opt for a 30-year fixed-rate mortgage, so the impact of rising mortgage rates on existing homeowners is relatively small, and the pressure is mainly concentrated on those who are buying new homes or preparing to change homes.

According to data from JPMorgan Chase, about three-quarters of American homeowners have mortgage rates below 4%. Based on data from the American Bankers Association, the average interest rate for new loans last week was 7.16%, which is comparable to the level in 2001. Analysts believe that the US housing market has started to recover after last year's decline. Goldman Sachs has raised its forecast for US house prices in 2023 from a decline of 2.2% to an increase of 1.8%, citing tight housing supply and better-than-expected demand.

KBW analyst Jade Rahmani estimates that the book value of industry leaders such as DR Horton and luxury home builder Toll Brothers will increase by about 20% annually over the next three years.

If you hold Toll at today's valuation, based on book value, you should expect a return of 15-20% in the next 12 months.