Get ready for a housing rebound

The move in this group of stocks reveals the truth: Residential real estate has hit bottom and is on its way higher.

By Jim Cramer Jan 6, 2011 9:29AM

more market commentary and stock picks from jim cramerIt's not a question of when the housing recovery will occur but of how big it will be. That's how I have felt watching the stock market action since the year began.

 

I use a couple of classic tells to forecast housing sales and values, and they are flashing bright green, really defying gravity in their obvious way of saying, "Housing's back in 2011." This despite the universal "Housing's the same mess it has always been" rap, as well as the downbeat projections, mostly from the noisy folks at Zillow, many of which do not reflect the hard macro data kept by other entities.

 

Look at these breakouts we have seen just this year: Whirlpool (WHR), Lowe's (LOW), Sherwin Williams (SHW),Pier 1 (PIR), Ethan Allen (ETH), Masco (MAS), Stanley Black & Decker (SWK) and even Williams-Sonoma (WSM) after that disappointing outlook. That's incredible. These stocks are screaming that sales for homes are going higher and that the value of homes is going higher, or people wouldn't be throwing good money after bad.

 

I really want to call people's attention to this Ethan Allen run, especially because short sellers are in disbelief about it. You don't go shopping at ETH unless you think your home is worth spending money on. The stuff is too expensive, much of it now custom, and the sales are amazingly strong. That's good for the $300,000 home cohort.

For the $200,000 home cohort, I look at Pier 1, and its sales are the best they have been since the housing boom -- before the bust -- began. Maybe better. Williams-Sonoma's run is harder to pin down, as it is a Tiffany (TIF) kind of place. However, its catalogs are a little more downscale. I say the strength reflects good news for all except the lowest-price homeowners and buyers.

Post continues after video:

Whirlpool has been trying to break out forever, but the housing start numbers have killed it. The WHR move says that housing starts are going to get stronger. I have mixed emotions about that, because I don't want a lot of new inventory. But you have to think that at some point these homebuilders will want to put up new homes to make money and not just to fulfill credit agreements or, wrongly, try to capitalize on the tax credit stimulus.

Big moves. Don't ignore them. They are screaming that housing has bottomed and is now going HIGHER!

 

Random musings: I did not mean to slight Weyerhaeuser (WY) by leaving it out, as lumber does matter, but there's been a spike in all commodities, and I do not believe that WY has yet felt any real boost from U.S. housing.

 

At the time of publication, Cramer was long Stanley Black & Decker and Weyerhaeuser.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his Charitable Trust.

 

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16Comments
Jan 6, 2011 3:24PM
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I usually don't waste my time posting on PR related stories, but this one deserves the entire cake!

Cramer, you have dumbfounded me!!!!  Based on a few stocks you predict a rebound of housing starts!!!!!!!!!!!!  WOW, that deserves comment!!!!  First thing, For housing starts to rebound, there needs to be a competitive market for all types of housing!  second, housing cannot rebound until the economy rebounds!!!  third, the economy cannot rebound until prices of food, utilities and tangibles decreases!  fourth, unemployment needs to split half of the 10 percent it will reach this year in order for any of this to change!  fifth, ARE YOU SMOKING CRACK?  I mean are your article ratings that low that you would completely disregard all of the external indicators?  You look at a couple of DOG stocks and predict a housing start rebound?  No wonder you write for MSN!!!

Jan 6, 2011 2:16PM
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Cramer said "You don't go shopping at ETH unless you think your home is worth spending money on."

You also don't go shopping at ETH (Or Pier 1, etc.) unless you are NOT going to buy or sell your house. I'd come to the opposite conclusion as Cramer from the same data.  Namely, increased spending at furniture stores represents a "we're staying put" attitude, which doesn't bode well for the housing market at all.  In other words, people are opting to make their current house nicer to live in, rather than looking to "trade up" to a nicer house.
Jan 6, 2011 2:06PM
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WOW! I have liked Cramer in the past, but i also believe he is way out of touch with this article. Unemployment is high, interest rates are increasing, foreclosures are increasing, and qualifying for a loan continues to get harder. Until unemployment get better, the foreclosures decrease, and we have some form of stated income loans will we see the housing market improve. And if we keep printing money like it doesn't matter interest rates will increase too much that it won't matter what else happens the market will not recover.
Jan 6, 2011 2:04PM
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Man could you be even farther off.

Have you forgotten about the entire shadow inventory the banks have on their books?

Have you thought about all of the foreclosures still in the works and still to come?

Foreclosures haven’t even slowed down yet, in 4th quarter 2010 there were more foreclosure filings then ever before. Also add to the fact that the banks lost so many mortgage notes and now are being forced in the courts to prove ownership if mortgages. It will take at least another 2 years to work through the mess the banks have made.

Jan 6, 2011 12:19PM
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I've had a house on the market for almost 3 years.  My take on these numbers-people have given up on selling and are fixing up there homes planning to hunker down until things look better.   That pulls a little supply off the market-but we still have huge numbers of short sales and pending foreclosures to go.  I'm not seeing a lot of improvement for the foreseeable future in my area.
Jan 6, 2011 9:58AM
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With $11M homes still "under water" in this country I fail to see a housing recovery anytime soon......and mortgage rates, although low, have been rising..... the math does not work for a recovery soon.

Jan 6, 2011 7:02PM
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Until "the little man" has enough work to sustain a motgage, Cramer is incorrect. In housing it starts at the bottom and works it way up. The Ethan Allen Crowd, and of course Williams sonoma are the ones who made money on the last Debacle, means they have money to fiddle around with while rome still burns. Should change his name to Nero perhaps.

Anyone want to buy my home before foreclosure, wait a few more months and you can pick it up at foreclosure. Just because it finally sold doesnt mean squat. Nope hes wrong  this time.

Jan 6, 2011 4:39PM
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I remember when Cramer called for a housing bottom in 2007.  He will continue calling a bottom until he is right.  I got this login name 4 years ago.  At the time, I felt crazy and everyone else thought I was crazy too.  Now it looks like I was overly optimistic.
Jan 6, 2011 4:23PM
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You also don't go shopping at ETH (Or Pier 1, etc.) unless you are NOT going to buy or sell your house. I'd come to the opposite conclusion as Cramer from the same data.

That is an excellent point and consistant with what I see everyday. I think residential real estate is still overvalued as much as 25%.
Jan 6, 2011 1:40PM
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Since when did Jim become a home builder? New home building permits are still in the cellar. Buying "stuff" for your home because your home gives you R&R is not the same as building a new home. And it has nothing to do with the owner believing his home price will go up. Jim, go back to late night comedy.
Jan 6, 2011 1:19PM
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Jim - why are you looking at retail supply houses & not the large publicly-traded homebuilders themselves?  Looking at the 2nd tier leaves too much room for questions.  Our housing starts have dropped to #s never seen before, even back into the 1950s.  With an overabundant supply of cheap homes on the market, and just looking at retailers, I think you have jumped the gun on this one.
Jan 6, 2011 1:03PM
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I have to disagree with you Cramer. I think CJCARE may have the reason sales are up at these stores, but are sales up that much or just their stock prices?  Unemployment is too high, banks have the bar set way too high for loans and there is way too many foreclosures/shadow inventory.  Cramer my friend I hope your right, but I think the rent is too darn high still.
Jan 6, 2011 11:34AM
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I love ya Jim, but disagree with this column.  Housing is gonna be a big problem for at least the next 2-3 years minimum due to homes/condos being held off the market "till I can get a better price." Then when the prices go up a little, new inventory jumps off the sidelines onto the playing field, which depresses the prices again.  It's like the unemployment rate - it ain't going to drop much for 2-3 years because as soon as there is some improvement, all the people outta work but not "officially unemployed" will jump into the job marked at the slightest uptick in the economy, leaving millions remaining unemployed and the rate at 9% plus.
Jan 6, 2011 9:22PM
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Buy low sell high.  Thats always what the experts say.

 

So why do people not want to buy the homebuilder stocks when they are near their lows?  The housing market has already hit rock bottom.  Right now is the time to be buying and selling the home builder stocks to make profits.  These stocks fluctuate up and down a lot and constantly.  Holding onto a stock expecting it to increase enough to help you become a millionaire is just foolish.  The only way to get rich off the market is increase the number of shares you have.

Jan 6, 2011 6:18PM
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Housing market may not be on the rebound but home builder stocks sure are. Not saying this means much but sure has helped my IRA! Way to go BZH!

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Hogwash! I'll make 2 points the disprove your misplaced optimism. 1. The companies quoted are international like the rest of the market and doing well from overseas investments. We don't make anything in this country. We consume. Profits are generated from overseas selling to us. The workers producing don't pay social security, they don't pay taxes period. Major loss of government revenue and money spent to stimulate the econonmy. Profits are reinvested overseas not here. So no job growth for us and not enough income for us to buy homes, period, at these prices. 2. Anyone that studied the chart posted right here on MSN money knows the bad loans due for interest resets doesn't peak until 2012. It won't be until 2013 the housing market can really start to recover. That's when the foreclosures will take a dive, the surplus of homes will start to decrease. The homes sold now are investors or people moving from existing to existing homes. Don't be deceived. The housing rebound ain't happening yet!

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