NEW YORK (
) --Don't build it and they will come. That's right, don't build anything new and the profits will come to those who already have the infrastructure in place. That's really the theme behind this market's advance, the undercurrent that plays out every day.
Let me walk you through it. This morning we heard from the keepers of the Case-Shiller index that housing is up in price in all 20 cities measured, with staggering gains in Phoenix, Las Vegas and Miami. These increases can happen simply because the homebuilders aren't building enough homes fast enough to meet demand. You have a million new homes coming on stream -- still only two thirds of what you would have gotten six years ago -- and that's just not enough given household formation and how many homes are lost every year to natural causes like fire, flood and dilapidation. They aren't building it, so the profits accrue to those few who have the capital to do so.
Editor's Note: This article was originally published on Real Money on March 26. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.
That's what's happening in the hotel industry, as you will hear tonight from
(AHT - Get Report)
, a gigantic hotel-owning real estate investment trust that has seen revenue per room go up in the high single digits. Why? Simple. Because the industry isn't building new capacity. There isn't enough credit and there's too much worry about the last downturn, so you have good pricing all over the place. It's a reason to like
(WYN - Get Report)
(MAR - Get Report)
(HOT - Get Report)
Remember, also, that
(BX - Get Report)
, our favorite private equity firm, has a huge inventory of homes. While people fret that they might get hurt when they go to sell them, the opposite is true. Because of the dearth of new homes being put up and the need for rentals, Blackstone's minting money with its gigantic home collection. You would think that we could all get into the home-flipping situation with the kinds of double-digit advances we are seeing -- 15% in Vegas, 12% in Los Angeles, 10% in Miami and 12% in Minneapolis. But unless you are a huge private equity firm with lots of capital, you don't have access to mortgage money on a second home and there's no mortgage money for investment property even if you are willing to put down 50% in most areas.