Berkshire Goes All-In on Housing Bet With Taylor Morrison Deal

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessBerkshire Goes All-In on Housing Bet With Taylor Morrison DealGreg Abel’s first major deal at the helm of Berkshire Hathaway Inc. wasn’t just a way to put a dent in a nearly $400 billion cash pile. It was also a bet on the American Dream.Author of the article:Dina Katgara and Alexandre Rajbhandari You can save this article by registering for free here. Or sign-in if you have an account.dwc7jmba[qan8s[t397gp5{]_media_dl_1.png Company-reported filings and dis(Bloomberg) — Greg Abel’s first major deal at the helm of Berkshire Hathaway Inc. wasn’t just a way to put a dent in a nearly $400 billion cash pile. It was also a bet on the American Dream.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountWith its acquisition of Taylor Morrison Home Corp., Berkshire vaulted into the ranks of the largest US homebuilders, topped only by D.R. Horton Inc., Lennar Corp. and PulteGroup Inc. based on 2025 closings. For Berkshire — now with Abel as its chief executive officer — the purchase extends a housing empire that stretches from factory-built houses and building materials to real estate brokerages and utilities, giving the conglomerate exposure to nearly every stage of the homebuying economy. It also pushes Berkshire closer to a longstanding goal of making homeownership accessible to as many people as possible.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“It’s clear that their strategy is to just play the whole affordable-housing issue,” said Bill Boor, CEO of manufactured-housing company Cavco Industries Inc., a competitor of Berkshire-owned Clayton Homes. “Berkshire’s the only one that I know of that’s really put it all together. It has all of it under one roof, including lending and insurance.” When Berkshire reports second-quarter earnings Aug. 8, investors will look for more clues about how Abel plans to steer the company after taking over from Warren Buffett this year, including whether Berkshire intends to become an even bigger player in the real estate industry.The bet reflects long-term optimism for the housing market during a challenging time, as persistently high mortgage rates discourage would-be buyers and weigh on homebuilder confidence. D.R. Horton cut its forecast for home sales this year, citing affordability constraints and “cautious consumer sentiment.” Still, the US is estimated to be millions of homes short of what it needs, keeping housing supply at the center of policy debates in Washington. Bipartisan legislation that became law in July aims to boost construction. “There will always be demand for new homes,” said Meyer Shields, an analyst at Keefe, Bruyette & Woods who covers Berkshire. “Homes are finite and the population is growing.”The Taylor Morrison acquisition complements the business Berkshire built through its ownership of Clayton, which focuses on lower-cost houses that are at least partially built in factories. With the two companies, Berkshire can serve a much broader customer base, from entry-level to move-up and luxury buyers, through offerings spanning manufactured, site-built and master-planned communities. Berkshire’s also getting a larger foothold in the fast-growing active-adult market. Taylor Morrison’s higher-margin Esplanade communities often take longer to develop, which makes sense for Berkshire’s “patient capital,” said Jay McCanless, managing director of homebuilding equity research at Citizens. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The deal aligns with Buffett’s longtime approach of buying established businesses with the hope of reaping improving returns over time. And with plenty of money to deploy, Berkshire has ample capacity to expand further in housing if opportunities emerge.“If Berkshire wanted to, they could write a check and take out the entire public industry with all the cash sitting on the balance sheet,” McCanless said. “But I don’t know that it would necessarily be additive to what they already get with Taylor Morrison.”Before the acquisition, Berkshire had already made some equity investments in companies in the sector. The conglomerate owns a stake in Lennar that was worth about $900 million at the end of the first quarter. It also previously held shares in D.R. Horton.Bringing Clayton’s manufacturing expertise together with Taylor Morrison’s traditional homebuilding operations could eventually give the firm more bargaining power with suppliers and speed construction, analysts say.UBS analyst John Lovallo estimates factory-built components such as prefabricated wall panels can reduce framing time by roughly 30% while cutting costs by about $6,200 a home.Under Berkshire, both companies also would have more resources to expand, with the goal of becoming “a top-three builder in every market” they operate in, said Sheryl Palmer, who will stay on as CEO of Taylor Morrison.“We’re joining one of the most reputable companies in the world,” Palmer said in an interview on Bloomberg TV. “The company is going to back us fully.” For Berkshire investors, the transaction may also offer an early indication of how Abel intends to manage the conglomerate.Under Buffett, Berkshire’s operating companies largely functioned independently, with limited coordination across businesses. Combining Taylor Morrison with Clayton under a dedicated housing operation would resemble Berkshire Hathaway Energy, where Abel spent years overseeing a collection of utility businesses.“As Greg looks forward, he is definitely going to want to make his own stamp on the company,” said Cathy Seifert, an analyst at CFRA Research who covers Berkshire. “Because he’s an operations guy, his stamp on the company may be how the existing businesses operate and function.” Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.