Most decay fungi are able to grow only on moist wood and cannot attack adjacent drywood. Two brown-rot fungi, Poria incrassata and Merulius lacrymans, are able to conduct water for several feet through root-like strands or rhizomorphs, to moisten wood and then to decay it.

These are sometimes called water-conducting or dry-rot fungi. They can decay wood in houses very rapidly, but fortunately they are quite rare. Poria incrassata is found most frequently in the Southeast and West. Merulius lacrymans occurs in the Northeast.

Both fungi can cause extensive damage in floors and walls away from obvious sources of moisture. Decayed wood has the characteristics of brown rotted wood except that the surface of the wood sometimes appears wavy but apparently sound, although the interior may be heavily decayed. The rhizomorphs that characterize these fungi can be up to an inch in diameter and white to black in color, depending on their age. They can penetrate foundation walls and often are hidden between wood members.

The source of moisture supporting the fungal growth must be found and eliminated to control decay. Common sources include water leaks and wood in contact with or close to the soil: for example, next to earth-filled porches or planters. Where the fungus grows from a porch, the soil should be removed from the porch next to the foundation wall to prevent continued growth of the fungus into the house. Poria incrassata normally occurs in new or remodeled houses and can cause extensive damage within two to three years.