I'm Practicing What I Preach on Housing

Sometimes I am desperate to prove a point. We have tons of data from the National Association of Realtors -- not commentary, but data -- that shows houses are bottoming out in price and trading again. We have neighborhood-by-neighborhood and county-by-county numbers that show high-velocity sales -- a sign of a bottom -- and lower cancellations in California. We have Bob Toll calling me to get on simply because he wants to tell people that there is at last light at the end of the tunnel -- this after he has told me for two years that things were terrible. And this is a man who had simply stopped grading his territories because they were all F's.

Last night I took the extraordinary step, at least for me, of bringing on a private builder -- ICI Homes, one of the largest private builders in Florida and a definitive survivor in the worst market since the 1930s -- because a friend tipped me that he has had the best April since 2006. Since 2006! Do you remember what that quarter was like? That was the biggest boom quarter of all, when we saw more transactions than the servicers could handle.

And why not? Prices have come down gigantically. Mortgages are the cheapest in our lifetimes. There's a new tax credit for first-time homebuyers. You combine all of these and you get two things: 1) It is dramatically cheaper to buy than to rent -- by as much as $4,000 a month, and 2) You have to be an idiot not to think about buying a property right now.

Still, nobody believes. I hear such non-refutational nonsense around the clock. People email me, telling me that I have no idea what I am talking about with the "coming bottom" in real estate. Here's the staples; you have probably heard of a lot of them by now:

1. "Your numbers don't include the mass of foreclosed properties that are being kept on bank balance sheets."
2. "There's a new wave of foreclosures coming because of Alt-A defaults, which are skyrocketing."
3. "Spiking unemployment will bring out a whole bunch of new sellers who will swamp the market."
4. "You only have "investors" snapping the stuff up, not real buyers."
5. "Prices have to fall 40% before you get a bottom."

There is no doubt that we will see more foreclosures if unemployment spikes badly from these levels; that always happens. But I am looking at a leveling off of claims, so I am factoring that in. Probably as many as half the Alt-As are not teasers, which means that as we get further and further from the last bad Alt-A quarter -- first quarter of 2007 -- we get some equity built up and we get some psychological reasons mounting that preclude easy walk-away. Yes, housing doesn't bottom until down 40%, but that's what we are getting! That's what is causing the bottom in the hard-hit areas, because that's where the rent/buy equation kicks in and where it is too expensive for homebuilders to build new homes, which dries up inventory faster than it can be created by foreclosures.

All of this is happening before anything substantive kicks in from the federal government, as almost all of the money allocated for these programs to keep people in their homes hasn't even been spent yet!

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.