Here's Why Housing Will Bottom Soon

The reluctance to cut debt and shrink gross margins goes to the heart of why we haven't had big new-home sales. As long as these companies held the line, buyers were sidelined.

Now I think you are seeing the beginning of something very different. The home price reductions will force other homeowners who are sellers to bring down their prices, too.

What I am saying is that we are going to begin to have an end to the overhang as sellers get more realistic. The demand is there, but not at these high price points. The notion of "stealing" a new house is so much more compelling than paying a lot for an old house.

This is how things bottom, with a changing perception of the power from the seller to the buyer. You get those $350,000 homes go to $270,000 buyers, even if they have to put up more money. At these levels, Fannie Mae (FNM - commentary - Cramer's Take) can help, too. The Centex price cuts, no doubt forced on them by banks that want to see progress, are working. Things will naturally flow better in housing as each builder follows Centex's lead, cuts their own gross margins, and work off the humongous inventory.

Random musings: Take a look at Owens-Illinois (OI - commentary - Cramer's Take). It was an outstanding quarter, but the stock didn't go higher. If you really believe oil has peaked, it should be your No. 1 name to go to, because glass uses more energy than any company save plastics.

At the time of publication, Cramer was long Owens-Illinois.

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