Has housing finally bottomed?

As jobs come back, so will homebuyers.

By Jim Cramer Dec 1, 2011 10:39AM

Image: Real estate agent giving keys to couple in new home© Mark Scott/Photodisc/Getty Imagesthe streetHas housing bottomed? Did we finally get a number Wednesday that shows it is bottoming? Possibly, but it wasn't the pending home sales figure. Although they jumped 10.4%, that isn't how housing will trough.


It will be based on employment, and the numbers from ADP said the U.S. added 206,000 jobs in November. That's much better than the expected 130,000, and it may be the key number to focus on if we are to believe that housing can stop going down.


We just got the Case-Shiller numbers on housing prices the other day, and in aggregate they weren't any good -- down low-single digits year over year. It's important to remember that when that data came out, we buried housing alive once again -- and that number is not even 72 hours old. So a market this big can't turn on a dime.


When we talk about the root cause of the housing crisis, we almost always talk about two things: the high level of foreclosed properties on the market, and the underwater borrowers who can't sell their homes and are more likely to simply stop paying their mortgages and bet they won't be evicted anytime soon. So, yep, they are squatting.


Related Articles

I don't disagree that those are highly intractable issues. But I do disagree that they are what's causing this crisis to continue. For the longest time, we had too many homes being built, in large part because of a terrible decision by the government to offer a tax credit to homebuyers. That, plus the tax breaks the homebuilders got, encouraged too many homes to be built on top of an already saturated market.


Now, though, next to nothing is being built. There are some months when we are building fewer homes than we did when our country was half this size. Plus, Federal Reserve chief Ben Bernanke is keeping mortgage rates low to allow potential homebuyers to buy homes that are now priced at much more affordable levels than at any time in the past decade.


But what we're missing are people who can take advantage of the low rates and the low home prices and do some buying. You can't get that loan if you don't have a job. The banks aren't going to give you a mortgage. They have tightened to the point that unless you have solid employment, without risk of being laid off, they will just decline your application.


That's why the key to stabilizing housing is creating jobs. And I think that's starting to happen. Plus, the potential massive stimulus from the payroll tax cut could make a real difference.


So if you want to see housing get better, you need the inventory overhang to be diminished. New jobs means new homebuyers. Having new home buyers equals the sector's bottom.


In other words, it could at last be happening -- and not a moment too soon.


jim 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 his charitable trust.

Dec 1, 2011 11:45AM
2014 at the earliest what are you smoking. there is a mountain of shadow inventory in addition to standing inventory with another round of foreclosures on the wa while the banksters are not lending only gambling.  Come on Cramer wake up and start becoming part of the solution  
Dec 1, 2011 11:23AM

c'mon....you predicted in 2010 that housing would bottom in june 2011


don't you even bother to track you inane blather?

Dec 1, 2011 12:42PM
No Jim;  We are headed to home prices in most areas as they were in the mid 80's.  Why is it so hard to see?  No Jobs No jobs No jobs.  You have to have the expendable funds to bid up home prices.  We are soon to have 50 million Americans concerned about where their next meal is coming from not paying an added 50 thousand for a home.  Do you want to know how most Americans are going to be thinking in the next 5 years? Leave your wallet at home for 3 days, miss 3 meals, 3 showers and ask someone on the street for help.  You cats have had it too good for too long.  The last 30 to 40 years in America is an Anomaly.  Try being politically correct on an empty stomach.  We need to require Americans to not eat for 48 hours prior to voting and then maybe we can achieve some level of economic reality.
Dec 1, 2011 1:03PM
SmileSmile Jimmy, you said it was bottoming over a year ago.  New housing is probably bottoming because it cheaper to build a new smaller house than those 4-5,000 trophy hones and rent's more than buying a house in some areas but with 4%  of the mortgages in foreclosure housing isn't at a bottom.
Dec 1, 2011 4:30PM

"So, yep, they are squatting."


I'm glad you're not a lawyer..... total lack of understanding of what a purchase money agreement (and associated lien) is.


The lender loans money to the borrower and the borrower uses those funds to purchase a house as a condition of the loan.  The borrower pledges the house (and wages) as security for the loan repayment.  The lender does not own the house.  If they did, you'd be a renter... the lender would have to pay the taxes out of their own pocket each year and the deed would be in the lender's name.


You can't be a squatter in your own property by definition.  So until the lender gets a  foreclosure judgment and gets the property back in their own name, the borrower is not squatting.  It's their property until a judge says differently.  Wether they are paying the loan has nothing to do with ownership.



Dec 1, 2011 12:39PM
A side effect of the home occupiers squatting in the foreclosed/delinquent mortgagee homes is the condition of the homes tends to deteriorate, and at some point those home will need to be replaced or rebuilt.
Dec 1, 2011 3:34PM

But what we're missing are people who can take advantage of the low rates and the low home prices and do some buying. You can't get that loan if you don't have a job. The banks aren't going to give you a mortgage. They have tightened to the point that unless you have solid employment, without risk of being laid off, they will just decline your application.

To put is another way, I use a fishing analogy. What has occurred is predatory over fishing. This over fishing has crashed the population of qualified buyers and overwhelmed the lender price supports. What is needed is a breeding program called real and adequate job creation in excess of 300,000 non farm payroll jobs per month for years.  We are in a downward facing demand driven spiral and it isn’t over until it is over. The media can try to push perfume all day, but the stench is still there.  


There are ways to speed up the breeding process, but short term solutions lead to long term consequences. I think that is the best way to describe the borrow and spend provisions that were Reaganomics. Tax policy is a mute point in a downward facing demand driven spiral because unemployment has become a leading indicator of economic output. In addition, deregulation has created some market functionality problems in all the markets. Problems that have and will continue to reach across markets until the structural problems are fixed.  Too big to fail and excessive leverage in the market place must be addressed period.  Wealth disparity is a symptom of a far greater problem then just the perception problem created by lender price supports and media mind manipulation. We need a winning national industrial policy, not the globalist expansionist policies both parties indorse today which will eventually lead to a complete loss of sovereignty.  


We are doomed to repeat history if we don’t learn from it locked in Einstein’s paradox of insanity.


I can tell you how to turn the housing market around in less then a year without borrow and spend, but what is the point if we don’t fix the other problems. We are at a cross road. A time of deep reflection where you have to ask yourself do we want to go back to the tread mill economy caused by the existence of lenders in the housing market or grow into something better?  Who is John Galt?   


Dec 1, 2011 9:29PM
206,000 jobs were added last month, but I would like to know what the average wage for those jobs is?  You need to make a certain amount of money to buy a house.  If most of the jobs are of a lower wage, you will not see home sales increasing.  
Dec 1, 2011 3:24PM

Duh...The bottom is still a long ways out! There are so many homes underwater as well as the shadow inventory that the banks still haven''t put on the market.


We will be in this housing disaster meltdown for a long time to come!  I just love all these "so-called" expert opinions that don't know any more than the average US citizen or even less depending on how they wish to spin it on any particular given day.

Dec 1, 2011 10:47PM
Cramer:  These words just now popped out at me, " unless you have solid employment, without risk of being laid off, they will just decline your application".  Who is not at risk of being laid off???  The only people that come to my mind are retired or on welfare.  
Dec 1, 2011 3:18PM

forget it.  the loss of jobs hasn't stopped yet.  the foreclosed homes haven't been sold off yet.  the exodus of usa jobs has yet to end.  inflation is about to take off.  people moving in with friends or relatives leaving the inventory of homes yet again higher than needed. 


housing will not bottom out for another 3 years


That's why the key to stabilizing housing is creating jobs. And I think that's starting to happen. Plus, the potential massive stimulus from the payroll tax cut could make a real difference.
Dec 1, 2011 1:39PM




Dec 1, 2011 12:04PM
cnbc only cares about wearing knee pads to big business and political cronies to get favors. housing is cheap and should be considered if it fits your needs.it will probably be volatile but that is the nature with so much manipulation in the market place. Buy American and support our Troops.
Dec 1, 2011 3:25PM
The problem with this is the debt based society; complied by the mega cities. Where people come up with housing numbers based on what they feel. Case and point; the Washington state Growth management act. How capitalistic is this folks. Where Seattle housing is over priced by $200,000 each minimum. The supporters were all taking good donations from the banking industry like; WAMU.
Dec 1, 2011 11:56AM
What really needs to Happen is that the NfL sends Dominique SUH to every bank that makes bad loan decisions to just hit their target goals for new loans. It wouldnt hurt either if he was sent to all the real estate agents who havent a clue to what the market value is or the houses. I looked at 4 last month and wasted money on everyone one, appraisels that werent even close to their new value. But keep up the fight Cramer, BOOYAH..................
Dec 1, 2011 1:26PM
The housing crisis will never be over until us underwater home owners WHO DID EVERYTHING RIGHT and never missed a payment gets their property values back ! Where is our bailout at ? Lets see the tax payers pay to insure most if not all of the foreclosed mortgages to the banks ! I do not see my mortgage company cutting my principal 20 - 30 thousand off your mortgage ? THEY SHOULD but to us Americans who did not walk away and DID EVERYTHING RIGHT !!!! We just keep getting screwed! Now if the CONGRESS of the USA made a law that bank foreclosures cannot be sold for less than 10% of the purchase price ! OUR VALUES would still be in our homes! The problem is that  wall street banks are selling the homes in a 200,000 area and selling it a auction for 5000 !!! Thanks The best congress money can buy and wall street ! SCREWING AMERICA every chance you all get!!!!!
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

122 rated 1
281 rated 2
467 rated 3
722 rated 4
678 rated 5
609 rated 6
628 rated 7
464 rated 8
269 rated 9
139 rated 10

Top Picks




Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.