Any Housing Starts Are Bad News

We're breaking ground on fewer than 800,000 homes, the fewest since 1959, and all I can say is that it is 800,000 homes too many.

There's nowhere to put them.

It is uneconomic to build a home in this country. Any part of the country. If there were any rationality to the system, the credit lines to Lennar (LEN - commentary - Cramer's Take) and Centex and Horton (DHI - commentary - Cramer's Take) and Pulte (PHM - commentary - Cramer's Take) and Hovnanian (HOV - commentary - Cramer's Take) and Standard Pacific (SPF - commentary - Cramer's Take) should have been pulled and the endless putting up of new homes stopped. (I am exempting Toll (TOL - commentary - Cramer's Take) and KB Home (KBH - commentary - Cramer's Take) because they have the best balance sheets.) But the banks can't take the hit, as these loans are still current, and the homebuilders can't take the write-offs on top of the ones they have already taken endlessly, so we get more homes than we need.

We add that to the foreclosed home inventory, which doesn't move until prices have declined 40% peak to trough, and we get a glut that encourages you to walk away and rent.

What's incredible is that household formation from children and divorce runs about 865,000 year after year after year, and we obviously have many, many more people than we did in 1959.

Doesn't matter. So many more houses were built than we needed from 2004 to 2007 that there is no end to the housing problem when it comes to inventory. It is why any plan that allows people to stay in their homes if they are current (the FDIC's plan), or that allows municipalities to buy homes and give them to people, or that encourages individuals to buy homes using a tax credit, can get at this problem, root and branch.

Until it happens, and until the unsold pool is truly diminished, any housing start number, no matter how low, is terrible for the financial world because there will be no house price stabilization, and without that there will be no securitization and no end to the losses until $3 trillion is lost -- all of the homes that took variable mortgages from 2005 through the first quarter of 2000 -- the true risk pool that's out there now.

Random musings: BASF's news is deadly for Dow (DOW - commentary - Cramer's Take) and Du Pont (DD - commentary - Cramer's Take), and there will be another round or presumption about whether those dividends can be maintained. ... Where is that S&P rebalancing that moved up stocks at the close? Will it come back tonight? ... Thanks to Doug for explaining the rebalancing in the Columnist Conversation, where I am getting a ton of ideas these days.

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

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.