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Buffett is worried about housing. Should you be too?

Talking Numbers

Warren Buffett is considered the greatest investor in history, yet even he is confounded by the housing market.

In a recent interview with CNBC's Becky Quick, Buffett said:

"Housing is not that strong yet. I'm surprised at that. But, it's better than it was a couple of years ago. The pickup in housing has been slower than I would have anticipated. And, I would say that's true right to this date. And it's true in the secondary market for houses. The prices have recovered some and all of that. But, if you look at transactions and pending transactions in March, it's not booming."

(Watch more: Housing recovery slower than I thought: Buffett)

Pending home sales--homes under contract but not yet closed--were nearly 8 percent lower in March than a year earlier, according to the National Association of Realtors. The real estate trade organization also anticipates existing home sales to total around 4.9 million in 2014 compared with 5.1 million last year. Lower inventory is expected to boost prices by 6 to 7 percent.

Portfolio manager Chad Morganlander of Stifel's Washington Crossing Advisors says housing is weak because of too much leverage and mediocre employment data. He cites March's seasonally adjusted annual housing starts number of 946,000 as evidence of a muted market.

"Back in the ‘90s, prebubble, that was running around 1.2 million," said Morganlander. "We’re far from that."

Morganlander calls household debt one anchor dragging home construction down. "Let’s face it, we’re still in an indebted market when it comes to household debt," Morganlander said. "Household debt reached about 100 percent of GDP in 2007 and now it’s currently 83 percent of GDP. … Back in ’97, [it] was 66 percent of GDP. So, we’re still seeing a little bit of a deleveraging from the household."

The other anchor holding back construction is the job market, according to Morganlander. Average hourly earnings in April were up 2.3 percent from the previous year but he doesn't think it's enough for housing. "And, you also need to start to see jobs growth really accelerate," said Morganlander. April's nonfarm payroll growth increase of 288,000 "is great to see but we really need to see a 350 handle per month on a quarterly basis," he said.

(Watch: Buffett, Gates and Munger criticize high-frequency trading)

Then does it make sense for investors to buy into the iShares US Home Construction ETF, (ITB), which tracks some of the largest homebuilders in the US?

The technicals are tough, according to Ari Wald, head of technical analysis at Oppenheimer & Co.

"Longer term, my signals are mixed," he said. "I really can’t advocate a position to a long-term investor. But, as a trade, I think it does look attractive. I think the losses in March are setting up an opportunity here. I think you can buy it now."

To find out why Wald likes the ITB's technicals and to hear the rest of Morganlander's fundamental take on the housing market, watch the above video.

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