Berkshire acquires Taylor Morrison homebuilder for $6.8B in Greg Abel's first major deal as CEO

Berkshire Bets $6.8B on Housing Recovery Under New CEO

Greg Abel makes his first major acquisition as Berkshire CEO, buying homebuilder Taylor Morrison for $6.8 billion in an all-cash deal. The move signals confidence that the US housing market will eventually recover from its fourth consecutive year of dismal sales.

Berkshire is paying a 24% premium to Taylor Morrison's Friday closing stock price of $58.58. Analysts view the price as a bargain because the builder's home portfolio value exceeds its lagging stock price. The acquisition makes Berkshire a top-five US homebuilder.

The housing market backdrop is dire. Single-family home starts declined 9% in April, the steepest drop since August. A third of builders cut prices last month. High mortgage rates, job market uncertainty, and rising living costs have kept prospective buyers sidelined. Builders are offering incentives—including paying portions of mortgage costs—just to move inventory. Builder confidence remains low. Many Americans now believe homeownership is beyond their budget.

Yet Berkshire's bet rests on a countervailing force: a US housing shortage of more than 4 million homes. Analysts expect pent-up buyer demand will return once mortgage rates decline from their recent nine-month high. The company statement emphasizes "a long term belief in the strength of America's housing market and its underlying fundamentals, which we see as enduring over time."

Taylor Morrison is a higher-end bet, not a mass market play. The company focuses on the higher end of the market where buyers upgrade to nicer homes, rather than entry-level buyers who are struggling the most. A significant portion of its business is built around so-called build-to-rent single-family communities—homes constructed for rental rather than sale. Congress recently threatened build-to-rent developers with a seven-year forced-sale proposal, but House lawmakers removed it to rescue the sector.

This acquisition is part of a broader consolidation wave. Last month Avalon Bay Communities and Equity Residential agreed to merge in the largest multifamily combination on record, putting pressure on other builders to find partners.

Berkshire retains massive dry powder. The conglomerate holds $397 billion in cash—a figure that dwarfs both this deal and its simultaneous $10 billion purchase of a 0.01% stake in Google. The housing acquisition and Google deal together represent a tiny fraction of available capital, leaving room for further moves.