Parallel Housing Universes

One hundred and forty percent of all homeowners are totally underwater on their mortgages -- even the ones that don't have mortgages -- and are about to mail the keys in. Foreclosures are skyrocketing and it is expected that over 293% of Americans will find their homes repossessed and will turn into Okies. An incredible 430% of wealthy Americans are running away from homes worth $700,000 or more.

No new homes will be built for decades and Toll Brothers (TOL - commentary - Trade Now), Lennar (LEN - commentary - Trade Now), Pulte Homes (PHM - commentary - Trade Now), D.R. Horton (DHI - commentary - Trade Now) and KB Homes (KBH - commentary - Trade Now) will no doubt file for bankruptcy given the incredible number of defaults and seizings. Not only that, but no homes have been sold at all!

It's all chimerical! They are literally debating starting fires in major housing developments to raise prices.

Okay, negative fantasy. Okay, apostate.

But anyone who was on the Toll Brothers call last week is struck with several contradictions:

1. There are a lot of buyers of homes -- I am not kidding, there are.
2. There is much financing as it is getting better and better as we know from the cancellation rate.
3. Toll Brothers has projects in the worst areas -- New York City and Florida -- that are getting traffic and orders.
4. The people who bought Toll Brothers' homes from 2004 to 2007 are all underwater but so what? What does it mean?

I am struggling with the top down vs. the bottoms up. The bottoms up is turning up right when the top down is turning down. I simply cannot reconcile the two.

I know that Toll Brothers is without a doubt an honest arbiter because the numbers don't lie. I know that Bob Toll had been extremely negative for 18 months. I know that he is a very shrewd observer of the new and existing homes markets.

Plus I look at the SMSA by SMSA National Association of Retailers data and on a non-aggregate basis, meaning that if I look at the most down-and-out areas, I see a major turn. That's what happens at the bottom.

The issue is that the aggregate data seems hyped and the positive individual data seems to be a tree falling in the woods. I am simply saying that one should at least consider the positive data as a temper and conclude the following: the housing market has stabilized. There's too much data that shows it has.

At the same time there is a truly parallel universe of data that shows it is point blank getting better. I have no illusions; that's as false as the straw man I set up at the top of this piece.

Something in between; that's right.

Something in between.

At the time of publication, Cramer had no positions in the stocks mentioned.

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