Warren Buffett: 'I Was Dead Wrong' on Houses, but Buy Anyway

Even the world's most revered investor makes mistakes.

Warren Buffett admitted he was dead wrong when he predicted a 2011 housing recovery in his annual letter to shareholders of Berkshire Hathaway, released over the weekend.

Despite some recent gains, home prices continue to fall throughout the country and the number of new homes built in 2011 was the lowest ever recorded.

But Buffett hasn't lost complete faith in the industry. Housing will come back -- you can sure of that, he wrote in the letter.

And in a Monday interview on CNBC, Buffett said single-family homes -- the most devastated sector of the housing crash -- were still attractive investments, potentially even more valuable than stocks. If it was practical, he said he would buy millions of homes.

He cited a reversing supply and demand equation: With for-sale construction at a virtual standstill throughout America, demand for homes will eventually surpass the supply, making it a seller's market.

But the advice comes with its caveats.

The investment only works if it's long-term, as housing prices are unlikely to bottom for at least another year, according to housing experts. Buyers also need to secure a low interest rate on their mortgage -- far from certain with lenders tightening standards, and refinance if the rate continues to drop.

Buffett said another driver for more home sales is biological, rather than economic: Young people will eventually want to move out of their parents' homes and start their own families.

People may postpone hitching up during uncertain times, but eventually hormones take over, he wrote in the letter to investors.

But even if young people hope to buy houses, they face daunting obstacles.

Unemployment was 16.4 percent for Americans 18 to 24 at the end of 2011, and high student debt, virtually mandatory for securing higher-paying jobs, makes it difficult to qualify under stricter mortgage standards.

Only 9 percent of 29-to-34-year-olds obtained their first mortgages from 2009 to 2011, down from 17 percent in a decade earlier, according to the National Association of Realtors.

Instead, young people have turned to renting or living with parents, boosting the strength of rental housing, but crippling the housing market.

Thus, many Americans currently can't take Buffett's advice, even if they wanted to.