Housing Set To Become 'Even Less Affordable' As Tighter Supply Faces Rising Demand With Rate Cuts: Focus On Buffett's LEN, DHI Play

The U.S. housing market is sending conflicting signals, with new data revealing a sharp decline in construction activity that is expected to tighten supply, just as a recent Federal Reserve rate cut aims to stimulate demand.

The emerging affordability crisis is highlighted by a stark contrast: while government data indicate a slowdown, legendary investor Warren Buffett has been investing billions in major homebuilders.

Construction Slumps, Squeezing Future Supply

The latest New Residential Construction report from the U.S. Census Bureau painted a bearish picture for August 2025. Building permits, a key indicator of future supply, fell 3.7% from July to an annualized rate of 1.3 million, the lowest level since May 2020. This marks the fifth consecutive monthly decline—the longest negative streak since the 2008 Financial Crisis. Meanwhile, housing starts plummeted 8.5% for the month.

This downturn in new construction prompted a stark warning from The Kobeissi Letter, which stated, “This signals fewer new homes will be built, tightening supply further… Housing is set to become even less affordable.”

US housing supply is set to get even worse:

Building permits fell -3.7% MoM in August, to an annualized pace of 1.3 million, the lowest since May 2020.

Building permits are approvals for new residential construction and serve as a leading indicator of future housing supply.… pic.twitter.com/kk50qIL5mX

— The Kobeissi Letter (@KobeissiLetter) September 21, 2025

See Also: Warren Buffett Doubles Down On America’s Housing Boom, Upping Berkshire’s Holdings In Homebuilders And Building Supply Firms By Triple Digits

Need Deeper Rate Cuts To Boost Housing Market?

The weakening housing data provided a clear rationale for the Federal Reserve’s recent 25-basis-point rate cut. According to Jamie Cox, Managing Partner for Harris Financial Group, the numbers were “cooperating for the Fed to adjust rates.”

However, the move may not be enough to spur a quick recovery. Eric Teal, CIO for Comerica Wealth Management, noted that a more substantial “2% decline in mortgage rates is needed to jump-start the housing market.”

The Oracle Of Omaha’s Bullish Bets On Housing

While the market digests the current slowdown, investors should note that Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK) made a significant bet on a housing rebound during the second quarter of 2025.

An Aug. 14 filing revealed that the firm took major new positions in two of America's largest homebuilders, DR Horton Inc. (NYSE:DHI) and Lennar Corp. (NYSE:LEN), signaling strong long-term conviction in the sector despite the short-term headwinds.

Price Action

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose on Friday. The SPY was up 0.50% at $663.70, while the QQQ advanced 0.68% to $599.35, according to Benzinga Pro data.

On Monday, the futures of the Dow Jones, S&P 500, and Nasdaq 100 indices were lower.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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