Housing Is Back, Despite Media's Worries

Sometimes the misdirection in the media's interpretation of the mortgage/foreclosure market simply drives me up a wall. Take this morning's fret story, "Loans That Looked Easy Pose Threats to Recovery," in The New York Times. This one is played big online, much bigger than another story, "Signs of Life as Sales of New Homes Improve." The gist of the big story? Option rate ARMs are going to crimp anything good that could happen from the housing recovery.

But you know what? The amazing thing here is the number of option ARMs that they say we are in trouble on: 500,000 homes. Sorry, I know that number is meant to scare people, but it is truly small, especially when you consider that 17 million homes traded during the period from 2005 to the first quarter of 2007, when the reckless lending set in. Given the charges we have taken in the banking system, the reserves we have, the bottom in housing and the robust market we have -- and it isn't just for first-time homebuyers, and it isn't just for low-dollar homes, despite the impressions made by the media -- you have to take this worry and throw it out.

It's like the foreclosure worry. Somehow we keep hearing that the foreclosures are overwhelming the markets. If that's the case, how can new-home sales soared 9.6%? How can home inventories be down 37% year over year and the foreclosure market be ballooning inventory at the same time? Of course the trick here is twofold: very few new homes being built - one-quarter of the peak -- and household formation -- almost a million new homebuyers every year.

We then hear that the buying is all $8,000 tax credit related. To which I say, you have to be kidding me. The demand for homes is real because they are affordable, a combination of price declines and mortgage rates.

Plus, and this is an important plus, we continually hear that the banks are holding back foreclosed homes. First it was because of moratoriums. Now it is because banks don't want to take the losses. Oh come on, they are selling what they have to sell, and they are watching house prices appreciate. We can keep endlessly coming up with reasons why the bottom isn't real. But let's be very clear, this option ARMs problem is not that big, not that big at all.

As a housing bull, I found the piece gratifying.

Random musings: Dell (DELL - commentary - Trade Now) saying big ramp next year, great for Hewlett-Packard (HPQ - commentary - Trade Now) too! Congratz to Mickey Drexler and the team at J. Crew (JCG - commentary - Trade Now) for a massive quarter.

At the time of publication, Cramer was long HPQ.

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