Mark My Words: This Is the Housing Bottom

Uh oh, the big May foreclosure numbers -- the numbers for when many of the state moratoriums expired, the real sign of things. Bad?

No.

Good. We had 6% fewer foreclosures than in April, and the lowest since July 2006, according to Realtytrac, a very reliable outfit.

This is another sign that the market for real estate is bottoming. You have to understand that a housing bottom is not about house price appreciation. It is strictly about house price stabilization, and that's what is happening all over the country. If it were house price appreciation, that would be good news for Lennar (LEN - commentary - Trade Now), Pulte (PHM - commentary - Trade Now), KB Home (KBH - commentary - Trade Now), DR Horton (DRI - commentary - Trade Now), Hovnanian (HOV - commentary - Trade Now) and Toll (TOL - commentary - Trade Now). We do not have appreciation. Stabilization, on the other hand, is not good for them because the stabilization is at a level that is too low to build because sales are driven by the foreclosures.

Take the worst market in the United States, Las Vegas. In May we saw the following: inventories down big, 9.3% year over year; transactions up big, a 60% increase over last year; and prices down big, $140,000 median, off 40% from last year. Eighty percent of the homes sold were foreclosure.

Now, best of all, prices stabilized and were only down 1.2%, which the Las Vegas Review-Journal reports is the smallest decline since November 2007, right when the peak occurred.

Remember the cycle -- at the bottom you get price stabilization and sales explosion. You do not get price appreciation.

These numbers are showing the bottom is in. If we get a bigger tax credit -- talked about in the Senate -- then you would have house price appreciation because we would burn through the inventory very fast. When we look at these numbers, we have to recognize that even after foreclosure moratoriums, we are getting flattening in price and a sales spike.

Now, how about the much-talked-about mortgage rate increases? They are up, up from 5.35% to 5.74%, big, but I would have killed for this rate a year ago. We need to keep that in perspective, too.

This is the bottom. This is what it looks like. Do not listen to those who say I don't know what I am talking about; I am in this market every day looking for real estate around the country.

I just wish there was more for sale. We are running down inventories nationwide, except in New York, because so many units are coming on as part of the end of a tax abatement that put 22,000 new apartments into the ground at the end of 2008, and Miami, because of a monster amount of condos that were started in 2007.

House price stabilization is here.

Random musings: Qualcomm (QCOM - commentary - Trade Now), boom! ... People are buying things when the price comes down, and they are buying autos, as we know from that retail sales number. ... Oil forecast goes up by IEA, how unreliable are they? What do they do, stick their fingers in the air? ... Clorox (CLX - commentary - Trade Now), nice dividend boost. Target (TGT - commentary - Trade Now) too! ... JPMorgan number bump for Research In Motion (RIMM - commentary - Trade Now) makes for some chance of a Nasdaq reversal.

At the time of publication, Cramer was long Qualcomm and JPMorgan.

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.