Spurious Arguments

I see a couple of shibboleths being tested right now. First, no housing bottom is ever going to happen. Second, toxic bonds aren't worth much and are all marked too high on all banks' P&L statements.

So, let's straighten this stuff out. There are many regions where housing bottomed and is coming back. The magic 40% decline plus the $8,000 tax credit, plus the low mortgage rates -- which could go even lower tomorrow when the Fed starts buying -- make many homes cheaper to buy than rent, especially the foreclosed ones.

If you clean up the foreclosures, you clean up the reason to leave your house. Sure, if you lose your job, it's going to be a problem. But you might qualify for the loan modification program. What you need to understand is that at the margin there is less of a reason to walk away from your house in some of the key areas where new homes stopped being built two years ago.

There are plenty of other areas, such as New York, where we are not near a bottom and there are plenty of new units coming on. But we did see some numbers from the Federal Housing Finance Agency that say housing's stabilizing. I think that's too soon. I think it doesn't happen until the summer. Yet the fact is it can happen, and you might want to bid for some toxic assets that have been written down by healthy banks because they could appreciate.

I think some prudent banks have written down some assets so low that they are worth speculating on by hedge funds using federal money. These banks will want to sell the assets higher, and the buyers -- using fed funds -- want the call on the big turn.

You see, the two are intertwined; catching a slower decline in housing at the same time as toxic assets come in for sale will lead to real buyers, and to a smaller amount, real sellers, particularly those who have written down assets because no one thought that these would come back this fast. Of course, many of the bonds contain tons of second-lien mortgages from California and Florida in 2005 to 2007. Forget about those. But many others have tons of performing loans that will make them a good buy.

All I am saying is that those who think things can't get better are going to be wrong. Those who think it is going to turn and turn hard, will be wrong too, because real estate is local.

Still, all things considered: People know that the opportunity to buy a house may not be this good in many areas of the country. So they are moving. If they are, you might want to bid for marked-down bonds. They can come back to life, especially if they were never dead.

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Know what you own: Companies in the homebuilder industry include Lennar (LEN - commentary - Cramer's Take), Pulte (PHM - commentary - Cramer's Take), Meritage (MTH - commentary - Cramer's Take), KB Home (KBH - commentary - Cramer's Take), Centex (CTX - commentary - Cramer's Take), DR Horton (DHI - commentary - Cramer's Take) and Hovnanian (HOV - commentary - Cramer's Take).

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