In his annual letter to shareholders of his Nebraska- based firm, the billionaire investor said market problems will end as demand for houses catches up with the supply which accumulated during the bubble a few years ago.
He added: “People thought it was good news a few years back when housing starts -the supply side of the picture -were running about two million annually. But household formations- the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses.”
Buffett said that reducing new housing starts to a number far below the rate of household formations was the best way to cure the problem.
As this option has been selected, residential housing problems will be gone in a year, he said.
Elsewhere in the letter, Buffett said financial institutions were “derelict” if executives did not bear full responsibility for risk control. He added that the financial consequences should be “severe” on them if policymakers are forced to step in.
His comments were made as Berkshire Hathaway saw Q4 2009 profits surge. Net income for the Omaha-based company rose to $3.06bn (£2bn) from £117m last year during the period.