Housing: the Bullish Story of 2009

Drats. I want housing to bottom in June of 2009. But when I read the articles by Doug Kass and Tony Crescenzi, I think I might be late!

We are running out of homes, running out of inventory and we are lowering mortgage rates to the point that if you can't stay in your home, I will buy it. Getting credit to build more homes is almost out of the question for all but, say, Toll Brothers (TOL - commentary - Cramer's Take), and it doesn't need money!

Do not focus on the previously-owned-home sale declines -- they don't tell the story. Focus on the 372,000 unsold new homes and the numbers of new homes being built by the homebuilders -- certainly not enough to replace the number that get sold, and they will get sold because of the 5.125% mortgage money that's coming down as we just got the new target pricing from the Fed, which should drive rates down big time.

Now I know that the existing-home sale inventory is a problem, but that can be worked off. People seem to forget that Americans have families, get divorced and have so many kids that they have to move. People seem to forget about immigration, which can add to the natural buyers.

There is only so long that you can put off buying a house, and the declines in the prices of homes are staggering in many areas. Rates down, prices down -- that's what causes people to get off the sidelines. And I want to be very clear, the bottom will not be put in unless houses fall 30% to 40% in the regions you are focused on. That's what moved the inventory in the Inland Empire in California and West Coast Florida, the two areas that started falling first and bottomed first.

Go read Tony and Doug. You will see what I mean. Housing will be the most bullish story of 2009, just as it has been the most bearish story of 2006-08. That could lead, ultimately, to a turn in the mortgages held by CDOs and the benchmarks of the synthetics. It can happen and it can happen fast, provided:

1.The homebuilders do not get TARP money.

2.President-elect Obama proposes a tax credit for buying a home.

3.We get some homebuilder bankruptcies so we even fewer new homes are built.

4.The Fed helps take mortgages down to 4.5%, which would make it nuts not to act, if only just to borrow the money and buy a property, any property.

I think very few people are ready for it.

Random musings: Those who don't understand how ProUltra funds really work should go read Eric Oberg's two parter. Remember, the man worked in derivatives for Goldman Sachs (GS - commentary - Cramer's Take) for 17 years before retiring as a managing director.... UAW is playing with fire. Everyone knows that without huge concessions, the industry will simply go under.... Here goes oil again -- really brutal.

At the time of publication, Cramer was long GS.

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