Warren Buffett rides again

Back in November 2008, this editorial referred to Warren Buffett in a piece about the stock market (“Stocks go up, and down”). Buffett’s message was essentially: don’t panic. The article received next to no responses.

But this time, we hit a nerve.

In the Pro Dealer Digest published earlier this month, the editors tapped the fountain of wisdom known as “The Sage of Omaha” in an article about the foreclosure mess. In our newsletter, we presented some housing-specific comments from the billionaire investor and CEO of Berkshire Hathaway.

Here’s what we said:

“Buried in Buffett’s 21-page letter to investors is a commentary on the housing crisis. Honest down payments and manageable monthly bills based on the borrower’s income are always good ideas, according to the Sage of Omaha. ‘Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective,’ he wrote. ‘Keeping them in their homes should be the ambition.’”

The responses started hitting our e-mail boxes almost immediately. There was some slight variance of opinion regarding the appropriate level of government involvement. But nobody—not a single letter—disagreed with Buffett’s stance on the desirability of big down payments and manageable monthly bills for all.

Buffett said more about housing in his 21-page missive. (Visit HCN.com for the article and the link.)

Foreclosures don’t happen when owners find themselves under water; they happen when “borrowers can’t pay the monthly payment that they agreed to pay.”

“Homeownership is a wonderful thing.… But enjoyment and utility should be the primary motives for purchase, not profit or refinance possibilities.”

Then he rattled the cage: “The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons.”

Those lessons are not lost on the readers of the Pro Dealer Digest.

“Homeownership is not a right,” wrote one reader in an e-mail with the phrase “Buffett is 100 percent correct” typed in the subject line. “It is a privilege for those who have saved enough to pay a significant down payment and earn enough to meet their monthly mortgage obligations.”

“Conservative lending practices are the only way to ensure the housing market stabilizes,” wrote another reader. “Foreclosures are unfortunate, but if a bad deal was made by the homeowner, they need to admit they made a bad deal and move on.”

There were a few complaints about the current administration. There was even the suggestion that Americans are building and buying houses that are simply too big.

There were some suggestions that the federal government really shouldn’t get involved in anti-foreclosure programs at all. Little was said about the bailout of banks and insurance companies (the $2.5 trillion Financial Stability Plan), but that is a story, perhaps, for another day.

It’s naive to think that any one person—even Warren Buffett—has all the answers to the challenges facing our country and our industry. But we believe our readers have some great insights into housing and business.

We encourage the dialogue, and we promise to promote it.