Nathan Slaughter

Warren Buffett's annual letter to shareholders is one of the most highly anticipated reports in the financial community. (You can find a copy of his latest letter here)

Every year, investors around the world anxiously wait to hear what the world's most prolific investor has to say about what lies ahead... this year was no exception.

As always, this year's report sheds some light on the inner workings of Buffett's mind and identifies specific areas of opportunity... and his latest prediction might surprise you.

Believe it or not, Buffett, in his 47th annual letter, has given a ringing endorsement to what is arguably the most spurned of all investments: housing.

In fact, he boldly claimed that it would be smart for affluent investors to purchase not just a second or third home, but "load up" on "hundreds of thousands" of single-family homes.

I couldn't agree more.

After the most devastating crash on record, home prices are dirt cheap in many markets. In fact, it is now cheaper to buy than rent in 98 of top 100 metropolitan areas. And let's not forget that mortgage rates are at historic lows.

Of course, we've been waiting for the housing recovery to kick off for some time now. But the past few months have brought real, tangible signs of progress.

-- Housing starts hit a three-year high in January by rising to an annual pace of 705,000 units. That's almost 100,000 more than the total from 2011.

-- The Commerce Department reports that new home construction permits reached an annual rate of 717,000 in February and then 747,000 in March, the strongest pace since 2008.

--Builders have just begun work on new condo and apartment developments at a pace of 241,000 units annually, a 21% increase from multi-family construction projects this time  last year.

-- Median new home prices have bounced 8% over the past 12 months to reach $233,700.

-- Homebuilder sentiment has risen in six of the past seven months, touching a fresh five-year high in March.


Nathan Slaughter

Nathan Slaughter is Chief Investment Strategist of Market Advisor, Scarcity & Real Wealth, and Energy & Income at StreetAuthority.com.