A housing stock for this stage of the cycle

Looks like Radian stands to give you the most bang for your buck as it is about to explode into profitability.

By Jim Cramer Aug 29, 2013 9:26AM

thestreet logoMiniature home on sheet of percent signs © Comstock/Getty ImagesEarly innings? Seventh-inning stretch? Double-header? Twilight double-header? Extra Innings? Walk-off home run?

 

Yep, I have heard the housing cycle batted around like this now for months, ever since the first interest-rate shock. Richard Smith -- the CEO of Realogy (RLGY), the largest real estate broker in the country, with 26% of all transactions -- believes we are still in the early innings for existing homes.

 

Smith said as much Wednesday night on my "Mad Money," show, pointing out that there hasn't been too much pushback from existing-home buyers because they can lock in rates. The pent-up demand is too great, and the credit is starting to flow in better fashion now than it had done when I'd spoken to him earlier in the year. If rates do go a great deal above 5%, then the calculus will change. Until then, the current quarter is going to be a strong one, and the fourth quarter should be, too. 

 

But here's what I thought was a more interesting takeaway from Smith's comments: New-home construction will not do as well due to the difficulty to lock-in rates for an expanded period of time. In other words, the new-home market, and specifically the builders, are in the penalty zone because of the rapid changes in rates, so they can't do as well as you would like if you wanted to play the housing cycle.

 

Now, I know many critics of Realogy think the business has peaked and that transactions are going to decline and that the best salespeople are taking too much commission away from the parent.

Others who know this cycle well, including hedge fund manager John Paulson, think there's a lot more to the story.

 

But if you believe existing­-home sales will continue increasing as rates settle down or go up more gradually, and if you don't want exposure to a real estate brokerage company, I think you should come down on the side of Radian (RDN). This is the real estate mortgage insurer that's just now coming out of the difficulties it has had, and it is about to explode into profitability. My colleague Doug Kass has been writing about this one for a while, and he's been dead right about housing.

 

Radian's got decreasing competition -- the Federal Housing Administration is pulling out -- as well as a much better balance sheet to write more insurance, and an improving default rate.

 

So if Smith is right, Radian -- not the homebuilders, and not Realogy -- may be the most bang for the buck that you can get at this stage of the cycle.

 

Cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 

 

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41Comments
Aug 29, 2013 9:46AM
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The housing market for most young and unskilled Americans might now be best described as located on the street of dreams.  Until wages rise dramatically or home prices drop there is no place for this industry to go.  Of course everyone wants our economy and stock prices to improve.  And yes if home sales and prices rise these are historically good events for the markets.  But this is not where we are from a macro sense and just wishing, hoping, manipulating the numbers, and attempting to influence sentiment will only work for a few and for a short time.  All pressures are to lower wages for American workers. With food and fuel rising substantially in the short run a housing recovery in the near term is simply wishful thinking.  JMHO 
Aug 29, 2013 2:32PM
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LITTLE ROCK, Ark. (AP) - A New York broker pitching stock to strangers over the phone happened to cold call an examiner with the Arkansas Securities Department and wound up losing his registration.

The department said Thursday that it revoked the registration of Junmo Hong of New York-based John Thomas Financial for securities fraud and other alleged violations.

The department said Hong "made unfounded representations" about a stock and falsely claimed to have spoken to the prospective client several times in the past. The agency says one supposed call in 2006 would have been when Hong was 14 years old.

Hong signed a consent order acknowledging the violations. Hong doesn't have a listed phone number and calls Thursday to John Thomas Financial did not go through.

Hong was also cited for violating Arkansas' do-not-call list.

SWEET IRONY... Hong learned from the Fat Cat School of Baloney Making.

Aug 29, 2013 11:05AM
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Cramer-- you are IGNORANT. The nation's mortgage portfolio is chock full of credit that will begin costing the holder only two-three years into a 15 to 30 year term. The cost of that credit is padded by Federal Reserve wrangling NOT balanced credit extension, collection and servicing. The Housing Crisis has YET to exist in Reality because both government and other influences have massaged it more than paid whores massage a Viagra-pumped Rush Limbaugh on payday. There's a Fast Food service industry STRIKE today. They account for the majority of Obama's job creation, and can't drive to work much less buy homes. Your entire perspective borderlines insanity.
Aug 29, 2013 1:28PM
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Lot of people eating healthier today in NYC, Chicago and Detroit.
Aug 29, 2013 3:29PM
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 It was a good news day ...did we miss somersetting ... has the sky fallen???  
Sadly, traders followed the pattern they set 3 weeks ago.   MSN please expose this
manipulation in an article,  This is outrageous!!! Traders treat the Markets as if they owned them.,
Aug 29, 2013 9:38AM
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i would think now is a good time to buy and hold real estate stock.  collect on dividends, let the equity grow,  things are turning around for the better.  it's not going to be a big bang growth, but certainly not at zero or negative. 

 

but apparently cramer's reputation of recommending dog stocks makes it sound like now is the time to SELL his radian and realogy stock.

Aug 29, 2013 12:15PM
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Today;s news is all good. ,,, deserving of positive posts.
Aug 29, 2013 10:47AM
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What he is not mentioning, although he is fully aware if it, is the millions of homes in the REO portfolios of the banks.

This can hit the market at any time as there are no regulations governing this shadow inventory.

Not saying housing won't improve eventually but the shadow inventory is part of he picture.
Aug 29, 2013 12:55PM
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Ahhh, problems and headwinds ahead, even probably for the Good Ship " USS Money Bags".

har, har.

Lying "scumbag realtors" comes to mind, the "new used car salesman" in better clothes.

Then the "unscrupulous bankers and mortgage companies."

We have a ton of empty houses still...Drive and see..

We have plenty of "tax sales and shadow inventory of foreclosures." 

And then we have "Foreign investors, buyers, landlords and flippers," coming back into Markets.

We were forewarned by many of "housing lagging indicators."

We were forewarned by many of "good jobs lagging indicators."

For God's sake don't be taken-in by Charlatans....You have been FORWARNED...!!!

Make the bastards pay you for a change...Make the "best deals."

Aug 29, 2013 12:55PM
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How do we expose the Market Manipulation?  Yes CGT11, you are right.  They are following a pattern.
Aug 29, 2013 1:37PM
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Lowes has a better selection of metal washers than Home Depot.

 

Going to casino Sunday to pick up $10 free slot play.

 

 

 

 

Aug 29, 2013 12:22PM
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Housing has peaked! This is the new subprime in stocks. Mark it down!
Aug 29, 2013 3:24PM
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Just talking to my self...."Self how you doing?"...."don't really know, but will probably feel better after going to Vet's Club and discussing the crop yields"...None of them know shidt about Wall Street.

And check to see how cold the beer is.

 

>40 cents is .40 cents ICE, Think Buffet started out that way..?

Good luck...

Ciao.

Aug 29, 2013 2:45PM
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I don't cut and paste either...Can't figure it out...My memory and knowledge is still retainable; YET.

 

But that's probably obvious by now..

Aug 29, 2013 2:42PM
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My biggest worry today....Is where will I get my $1 double cheese burger...Screw'em.

Hope they do get more money..

Aug 29, 2013 2:40PM
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Ice Cold....Hope you have noticed Northern Tier (NTI)??

Got a "fat" dividend last night....But they have about shanghai'd me.

Down a buck or so, and they dropped the div lower...Screw'em just like Casinos..

Now I have to wait them out...

COP is doing fine tho'.

Aug 29, 2013 2:35PM
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The 2nd Casino I went to a couple days ago...I had a $25 free play(no match)...

Put it all on Black, straight up.....Not allowed on "odds pay" play..

Red 16....Screw 'em.

Got a "free" coffee or coke and left..

Already had lost most everything else, different place....Screw'em all, but 7.

Last 4 trips have lost on 3....Screw'em, getting just like Miss Lilly.

 

Aug 29, 2013 1:06PM
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Hell we are reading the Column of "one" of many (dozens/hundreds) MANIPULATORS...

 

We don't have to go far....None of us are DAFT yet, are we ??

 

Although I may be close...? GET OFF MY ROAD !!!...(no peeing here).

Aug 29, 2013 6:24PM
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Like we said earlier, this afternoon wasn't going to be easy, just to to try to keep the markets in the green would be tough and it was...Another few minutes of trading and the main ones, the Dow and S&P would have probably ended in the red....When these scumbags take over bad things happen. Do not forget, we were up over 80 points...Oh well, at least we ended up. The bad news is that tomorrow is Friday and these cheating bastards wont be so forgiving. We shall see.
Aug 29, 2013 3:42PM
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Long time ago I had blackjack basic strategy memorized, but it took me two years.  I decided to just take a strategy chart to the tables and invest my time elsewhere.  The casinos don't care, but other players start asking you how to play their hands.  Igits.

 

I try to stay away from slots and video poker except in Vegas.  In the Indian casinos the machines are "video lottery terminals."  It's almost impossible to find out anything about video lottery terminals, but an "insider' once told me that they work similar to pull tabs.

 

 

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