There is a good combination of events brewing, which lead Jim Cramer to believe that the housing market is finally making a comeback.
Finally! The poor housing market has been one sad story. The group is represented by XHB, the home builder ETF, has been one of the worst performing sectors in the market. It's pretty pathetic.
"But now I see two signs that this group is about to join the bullish party: A thaw in lending, and lower gasoline prices," said the "Mad Money" host.
First, Fannie Mae is making it easier for banks to lend money. Woo hoo! It announced that it will be easing rules on mortgages. Yes, this could lead to higher defaults, but in Cramer's opinion, it could also be a huge positive for home builders.
Currently, the only people who can borrow money are the ones who actually don't need the money because they have collateral to cover themselves to ensure there is no loss if they foreclose. This is the exact reason why there is a recession in levels of home building, added Cramer.
There are two general parties created by this: Those who want to stimulate lending by lowering the down payment on a home from 20 percent to 3 percent, and those who want to ease credit ratings for home buyers.
Cramer thinks the latter option would be huge, considering that you need a near perfect FICO score of 730 to even get a home loan in the current housing climate.
Lower gasoline is also a good sign for homebuilders. The cheaper gas could encourage people to buy a home that is further away from their place of work and spur homebuilding in areas where people were reluctant to build before.
"Sure, there will be more defaults. But frankly, that's the price of returning to a stronger and more realistic housing market," said Cramer.
No comments:
Post a Comment