Jim Cramer: The American Dream Has a Big Problem

NEW YORK (Real Money) -- If the winner says there are problems -- if the winner complains -- then I take the criticism at face value.

I am talking about the comments on "Squawk on the Street" made yesterday by Stuart Miller, who runs the best homebuilder in the world, Lennar (LEN) , about how tough credit is crimping the home buying business and driving people toward rentals -- a development that keeps the economy from reaching its potential.

I've known Stuart for ages and knew his father, Leonard Miller; this company has always prided itself on being the least boom-bust of all the companies in the business. Miller sold real estate when it was at a high and bought real estate back when it was at a low, and has amazing sales and terrific gross margins. The orders and the pricing have all been terrific.

The stock's the best performer in an admittedly deservedly lackluster group, despite near record-low interest rates. 

But Miller thinks that his company, and the industry itself, would be so much better served if there were more credit being given and mortgages weren't so hard to come by.

It is amazing that we accept the current level of housing starts in this country, about one million, as reasonable given that we would, in another time, Miller says, call that number purely a recessionary figure. It's so far from where we should be, but the banks, he says, are demanding too-big down payments and too-high credit scores.

I thought his answer, when I asked him who is at fault, seemed pretty spot on: no one.

We simply have gone through a horrendous decline that was triggered by people who bought homes without documentation or little or no credit at very high loan-to-value ratios and the country, collectively, isn't ready to ease things up this close to that debacle. Not only that, but he says increasingly banks don't even want to be in the mortgage business. It's too big a hassle, and not a lot of money in it.

I don't know a way out of this box. I do know that Fannie Mae (FNMA) has stepped up credit in an aggressive fashion. I do know that employment will help. But the simple fact is that the American dream got too easy to reach and now it is too hard to obtain, even as rates are low and affordability remains good.

It's a cautionary tale, because if this economy is going to get moving into higher gear, then we need more people buying homes, which has a huge multiplier effect on the rest of the economy.

Now, normally I would say this is just grousing. But when it comes from the homebuilder that's up 20% and which has delivered on its numbers, I think it's time that the nation collectively addressed this problem.

Random Musings

  • Thanks for the incredible outpouring here for the loss of Pop, who was my biggest pal and total inspiration -- strong until the end. It will not be forgotten. You will not be forgotten.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

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