A Light at the End of the Housing Tunnel

It will be oil, not homes, that causes us to keep going down. Homes are moving. They turned out to be more price-sensitive than we thought.

I honestly believe that with the 14% decline in the Case Shiller index, there is a light at the end of the tunnel. If we get the FHA to back up the mortgages so we can figure out who has the servicing rights and get out from under the Countrywides (CFC - commentary - Cramer's Take) (which I think only marginally help and overwhelmingly hurt the cause, because they want more fees and higher rates and not to work people through -- remember, they are the servicer and often don't hold the mortgage) then you'll get rid of the huge roll of soon-to-be foreclosures. And you already see the positives developing in Florida, where markets are getting tighter because of the vast price declines. It is true that you have to put down more money than before, but it is also true that the price is more important than the size of the down payment.

Now, of course, you are seeing the homebuilders heading back toward their 52-week lows. Hovnanian (HOV - commentary - Cramer's Take) didn't hold the print price for its equity refinancing. Centex (CTX - commentary - Cramer's Take) looks particularly grim. What is KB Home (KBH - commentary - Cramer's Take) doing still paying a dividend?

But that's the price they have to pay for selling homes at a loss, speculative homes that were still in the pipe going into the downturn or ones they put up to please the banks and have cash flow in the door.

But this part of the economy is being discounted correctly and could get better in 18 months, despite the gloom. When you get a price trajectory like we have and you couple it with a decline in foreclosures, you'll get a couple of months where the market won't go down and we'll be in better shape.

It will not be enough to shake the oil-induced malaise, but it will provide a psychological relief that could be the difference between a severe recession and a shallow downturn.

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

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