Banks, Homebuilders Could Zoom on the Next Cut

Banks and home shortages, these are going to be the two big stories of 2008.

Because we have taken out so much mortgage capacity and because the homebuilders have basically stopped building -- they are building one-quarter of the homes they did in 2006 -- we are going to run out this year.

That's right. The people who still own homes who bought then in 2005-2006 are hunkering down, they are spending less, going out less and not leaving their homes much so they can refinance and pay down debt and keep their homes. They are not going to be flooding the market with supply.

We know the homebuilders' inventories are no longer ballooning. We know mortgages rates are 5.18 -- I went onto BankingMyWay.com, which is owned by TheStreet.com, and found a 5.18 rate in my ZIP code. It's like Moviefone for rates. Count me in.

Meanwhile, the mortgage industry's been wiped out except a couple of players. Those are now presuming the monoline Gang of Four aren't going to pay. They have issued equity, but not enough to cover what I think will be a huge push into these value names.

Rates are too low, there won't be enough houses to go around soon, because there are no new homes and nobody left to sell them -- it is enough to make me think that the financials and the homebuilders, many of which are already up huge from when I called the bottom from the stress portfolio, will have a gigantic move off the next rate cut, and you need to buy any weakness.

And nobody owns them now but value funds, who simply will not sell them until they are much higher.

Makes me want to buy more Citigroup (C - commentary - Cramer's Take)!

At the time of publication, Cramer was long Citigroup.

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