Investors Are Avoiding This Industry Like the Plague. Berkshire Is Going All In. Should You Invest?

The ailing U.S. housing industry just got even more bad news, if that can be believed.

Pending home sales fell 7.3% in September from the previous month, according to the National Association of Realtors. The year-over-year decline was 11.3%. No region of the U.S was spared the carnage: the West had the largest decrease, followed by the South, the Midwest, and the Northeast.

So, you can't blame investors for avoiding homebuilder stocks. The State Street SPDR S&P Homebuilders ETF (NYSEMKT: XHB), which tracks the S&P Select Industry Index, is down 10% over the past year. Some builders have fared much worse: Lennar (NYSE: LEN) has plummeted about 36% over that period.

Yet Berkshire Hathaway (NYSE: BRKB) is making large investments in the housing industry, including a significant acquisition and additional investments in Lennar -- a September stock purchase increased its stake in the company to 11%.

I think Berkshire's recent moves into the housing industry mean investors should take another look, but only if they're prepared to weather significant volatility and wait patiently for housing to recover. In fact, there may be a smart way to play the eventual housing recovery.

Image source: Getty Images.

So, what's ailing the housing industry? A lot, to say the least.

The industry has been struggling for years due to a massive shortage of housing supply and, more recently, soaring mortgage rates that have made home purchases impossible for many Americans. The average 30-year mortgage rate has climbed to almost 7.4% this year, more than one percentage point higher than at the beginning of 2026 and well more than double what the rate was five years ago.

The housing gap could be a huge opportunity

The White House puts the housing gap -- the difference between the supply of and demand for available homes -- at 10 million houses.

I think Berkshire CEO Greg Abel sees that housing gap as a massive opportunity. So he's investing in homebuilders now when they're cheap. That includes a $53.9 million purchase of Lennar shares in September, taking its stake in the homebuilder to $2.2 billion, and the July acquisition of homebuilder Taylor Morrison for $6.8 billion. Berkshire says it will integrate Taylor's portfolio of housing brands with its own Clayton Properties Group, a collection of 15 regional builders, and the combined entity will make it the fourth-largest homebuilding operation in the U.S.

So, should ordinary investors be following Berkshire's lead into this beaten-down industry? Well, it's worth listening to what Abel recently said on CNBC: "We don't envision a quick recovery [in housing], but we do see it as an industry that we definitely want to be invested in, and we're invested in for the long-term."

Clearly, Berkshire has the patience and massive resources to wait for housing's recovery. And its recent purchases mean it will be locked and loaded with abundant homebuilding capacity when that happens.

But with interest rates poised to rise as the Federal Reserve tightens financial conditions in response to elevated inflation, and bond yields -- which determine mortgage rates -- set to remain high as governments and AI infrastructure builders compete for capital, waiting for housing to recover could be a long and bumpy ride, to say the least.

I would suggest that investors interested in playing the long game on housing leave it to the experts: buy shares of Berkshire and profit from their patience and resources.

Matthew Benjamin has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and Lennar. The Motley Fool has a disclosure policy.