Cramer: Map to a Housing Bottom

This post appeared earlier today on RealMoney. Click here for a free trial, and enjoy incisive commentary all day, every day.

I am kind of amazed at some of the things that no one seems to care about. When the FDIC seized IndyMac, it was a godsend -- get that crummy lender out of the picture. Then the FDIC announces a radical plan to allow homeowners who borrowed from them to get off the toxic 2-and-28s and teasers and go into fixed-rate loans with some forbearance. We got that this week. No one cared! No one!

How can that be? The FDIC is offering us a plan that would make it so we can root against Washington Mutual (WM Quote) and know if that scourge of all lenders went under, we would have far fewer foreclosures because of the FDIC takeover. Also, once the loans are all under fixed rates or sent to the FHA for rehab -- as the housing legislation makes clear will happen -- we are going to see a dramatic decline in the rate of foreclosures.

Now, right now, when we see this, we are skeptical. When Wells Fargo (WFC Quote) decided to give its borrowers more grace -- the same grace that other banks give -- we immediately figured it was a canard to mask things. But John Stumpf, the CEO, said it seemed like the right thing to do, and the bank would do better trying to work things out with lenders than throw them out on their butts. Instead, of course, the rate of foreclosures went down, and I bet ultimately the number of foreclosures will go lower.

We need time. We need time to solve the housing depression. The elements of time play out positively, because we are a growth nation that cannot have as few homes built and as few homes bought as in 1991, when we had 248 million people in this country. We now have about 310 million people. We have more than 60 million more people in this country, and we are buying as many homes as we did back then? How long can that last?

The answer, of course, is that given the dramatic overbuilding and the foreclosed homes, the oversupply will take months to burn off. But not years. The trick is to restrict supply, which wasn't being done by the homebuilders until last year, when they finally cut back the numbers -- they are now building about half the homes they did in 2006. Then we need to make it easier for people who bought homes to stay in them, so far the hardest part of the equation. Given that 14 million people bought homes between 2005 and 2007, and half took exotic mortgages to pay them, I figured there was no way that more than 3.5 million people could lose their homes (half of the half that took the 2-and-28s and the pick-a-pays and all the other nonsense). That was wrong. I am now thinking that all -- that's right, 100% -- of the people who bought homes between 2005 and 2007 are going to default. All of them! It makes too much sense not to given the home price declines.