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"Awful Housing Limps On"

By Jim Cramer
RealMoney.com Columnist
12/17/2007 8:41 AM ES


"There is a bottom here somewhere in housing. We all know it. Yet, uniformly, we all know it's just awful and we know that it can't bottom until we see a bank pull a revolver on a homebuilder. Right now there is just no way to get to a bottom.

We know that people can't sell homes because the buyers seem so unable to get financing. But given employment, that shouldn't be the case. Think of it: Before teasers, in the 1990s, people used to buy houses with down payments. Now they are being asked to do the same thing, and they can't.

But what I find amazing is the UNIFORMITY of belief that housing is nowhere near a bottom. I don't know a single non-consensus view out there. Yet, what would happen if a Hovnanian (HOV - commentary - Cramer's Take - Rating) or a Standard Pacific (SPF - commentary - Cramer's Take - Rating) or a Beazer (BZH - commentary - Cramer's Take - Rating) actually did file for bankruptcy. That could be a tipping point.

Of course we could get another tipping point, a monoline -- Ambac (ABK - commentary - Cramer's Take - Rating), PMI (PMI - commentary - Cramer's Take - Rating), MGIC (MTG - commentary - Cramer's Take - Rating), MBIA (MBI - commentary - Cramer's Take - Rating) crashing. But Security Capital Assurance (SCA - commentary - Cramer's Take - Rating), the worst of the lot, should be gone already, and no one seems to be pressing them.

Wouldn't it be obvious that Washington Mutual (WM - commentary - Cramer's Take - Rating) and Countrywide (CFC - commentary - Cramer's Take - Rating) go under? Their numbers of delinquencies are just HUGE; in 1990 though, these guys would already be out of business. Their resilience is a tribute to the fact that the consumers who keep money there don't seem to know the difference -- they know FDIC behind them -- and the FHA is a total bailout for them, but nobody cares because the press and the Congress doesn't really know that the bailout is going on for the worst lenders right now!

That's the real difference right now. No one in the cycle is pressing. No one is demanding collateral or trying to close anybody. So all of these walking wounded keep doing their job, and we can't get to a fast bottom because everyone's staying in business.

Plus, the banks are staying afloat off of an amazingly powerful and never-talked-about commercial construction boom of uncertain origin that seems totally separate from residential, as separate as residential was vs. commercial in 1990. That's making it so the banks can get away with these hits without Fed help.

We all think the Fed is looking at inflation for its reason not to cut more aggressively, but I think they are looking at employment AND commercial construction and saying "Where's the beef?" to those who are hurting. I also think the Fed is saying, "Look, CDOs have to sort themselves out. We are not going to do anything that sorts out this ridiculous practice."

In some ways, the Fed's strategy would be brilliant if there were no money on the line.

Here's how I would look at it. If I were a bear, I could not think of a better situation. The Fed's favoring lower prices even if it doesn't know it. Maybe it does. Maybe the Fed thinks that stocks simply don't matter and there is a higher mission: drive out every marginal player and start over.

I just think the Fed doesn't know how lacking in resilience an economy can be. Is there anyone who thinks we would not be in recession if it weren't for commercial construction and overseas exporting?

So, we all take it for granted that everything is bad and getting worse. The only places you can make money are the oils, medical and ag, and companies where the U.S. doesn't matter much. Everything else truly is awful.

Because they seem to want it to be awful at the Fed. And they and the bears are getting their wishes. "

(in www.realmoney.com)