CNBC's Jim Cramer calls the bottom for housing*

CNBC's Jim Cramer has accurately called some of the major turning points in the ongoing housing bust, and he is making another call today. He sees the bottom for housing. But here's the asterisk: *Cramer said he expects a bottom by the third quarter of 2009.

In explaining his call, Cramer cobbles together a familiar litany of signs the housing market is stabilizing: an increase in sales spurred by falling prices; a slowdown in home building; federal efforts to help troubled borrowers; and population growth that will spur household creation and demand for housing.

More, from CNBC's article on why Cramer sees signs of a turnaround:

"The horror shows that are the California, Florida and Arizona real estate markets are no longer bleeding into other areas. These heavy losses are being cordoned off, Cramer said, and different markets are evening out.

Lastly, even these horrible areas –- Bradenton in Florida and the Central Valley in California –- are bottoming. The first to fall is usually the first to return, Cramer said. He’s predicting that Miami and the Inland Empire are next."

I've complimented Cramer's calls before, and that usually encourages a number of you to cite chapter and verse of big things he's messed up. Before you jump on him -- and you're welcome to -- I'll say for the record: He was the loudest voice last summer saying, correctly, that the Bernanke Fed was behind the curve in fighting the credit crisis (this was the classic "Bernanke has no idea!" meltdown on live television). He was also one of the first talking heads to articulate just how bad the housing bust was getting in places like the Inland Empire.

-- Peter Viles
Your thoughts? Comments? E-mail story tips to Peter Viles.

Comments

[Amazing_Happens]

I don't have specific examples regarding the housing market, but with the stock market, Cramer's modus operandi is pretty much to cover all his bases (Stocks are going up! Stocks are going down!) so that someone will think he is right some of the time. I wouldn't place much credibility on his predictions, unless he made only one prediction and stuck to it in the future.

[Chuck]

Here's why Cramer is probably right -- Christopher Thornberg, everybody's favorite economist, said basically the same thing this week. Thornberg added this asterisk: Prices will hit bottom and stay there for two years. At least.

[E]

Cramer also said that Bear Stearns was fine.

'nuf said.

[Rational Renter]

The first areas to bottom will be the first areas to recover. That's why Cleveland is now going strong. And, as Cramer says, the Inland Empire might follow suit. But Los Angeles is going to be one of the LAST places to bottom, and it will therefore be one of the LAST places to recover. Anyone expecting price appreciation within 5 years is mistaken.

[Rational Renter]

Also, Peter, a thought:

Why don't you clear away the unnecessary hurdle of entering that code before being able to post a comment? You might be surprised how little spam shows up, and it might liven up the commenting system if you got rid of the hassle.

[Happy4LA]

Seriously, are you kidding me!? I'm a subscriber to Jim Cramer's website and Jim is absolutely horrible. Do you know how many bottoms he's called this year? He was a housing market bull a few years ago and now that Real Estate has crashed he's finally come around. Go to his site, get a trial membership and just listen to the vitriolic comments from his members. He's a FRAUD. He had NYX as his "stock of the year" in 2007. It's down over 50%. He called this year the year of natural gas and that's tanked too.

Tell me other than speaking loudly to give himself more credibility than he deserves, why should he be listened to? How many mistakes can this man make and still be given ANY credibility?!

His Action Alerts subscription portfolio is down over 15% this year. Please, do some homework on the guy. He recommended Citigroup last year and told everyone that Countrywide was a good investment. Not to mention Thornburg Mortgage. He said there wasn't a subprime problem last year when New Century Financial's stock failed last year.

I beg you, don't give Jim Cramer any more unneeded publicity. He's already lost too many investors money that thought he knew more than him.

Look at these YouTube videos from Don Harrold exposing Jim Cramer http://www.youtube.com/watch?v=dt8pd9xd2h4

http://www.youtube.com/watch?v=Udjx0f93Wbk

It's totally irresponsible to give Jim Cramer any credit for being accurate. The guy makes so many predictions he's bound to be right some time, but he's wrong more than he's right.

[Laker]

"....The first to fall is usually the first to return, Cramer said. He’s predicting that Miami and the Inland Empire are next...."

WRONG. IN RE, The 1st to fall is the last to return. Look at IE, Palmcaster in 1991-1997.
In nice parts of LA in 1999 prices have reached the previous peak of 1991. But in IE and palmcaster, price maybe in 2001-2202 reached 1991 peaks...

It is also correct to say that the nicest areas will fall the last and rise the first. The worse stuff is falling first and rising last.
Cramer is saying the IE is next to climb 300% again....
Either he never been to IE or he thinks Stated income Option ARMS are coming back...
just couple of months ago, he was calling to bulldoze the whole inland empire....
Somebody better check Cramer's bank account for direct deposits from the NAR...

[mbob]

Clarabelle the clown foaming and punching buttons as he shrieks out his finance forecasts is a low grade Howard Beal clone, aped from "Broadcast."

Paddy Chayefsky wrote a better character. In fact, an original. Unlike JC.

[RM]

Cramer will say whatever he needs to say to accomplish what he wants to see happen. Cramer and many other stock pushers began telling investors since the middle of last year to avoid real estate and instead plunk all their money into stocks because that's where the gains were going to be. At the same time he was going off with his loud rant that the Fed had no idea how bad it was getting for the financial industry, he himself was shooting down the housing market which he probably forgot was the basis for much of their balance sheets.

Now a year later that the stock market pushers have realized that the market is not going to rally on to new highs or even recover what it has lost without a recovery in housing, they are now trying to imply that a housing recovery is just around the corner. Good luck but I doubt it, even if the housing market does bottom out in 2010, it will be another several years before it recovers to at least some historical normalcy.

If foreclosures don't slow down any time soon the impact on financial institutions will be devastating and, as Cramer now knows, what is bad for financial institutions is bad for the stock market.

[Nick]

... ok, this is going to sound strange coming from me (I'm fairly bearish on the housing market), and I don't think Cramer has any more predictive ability than an untrained monkey, but he may be right*. Here's the asterisk: *the bottom for low end, so called "sub-prime" and rural areas.

The middle to high end areas will take much larger to fall, as a lot of the large loans have more time-delay features built in (neg-am, fixed to adjustable, etc.). The high end is also stickier, as people generally can delay selling or foreclosure longer, through various mechanisms. It could be 2+ years before the high end really starts falling back to sanity.

On the other hand, though, the low end is already getting pretty cheap, and the banks have probably worked through well over half the sub-prime loans which are not backed by the government. There's not much money to be made flipping on the low end either. There will still be a few rotting FHA loans left (and still more being created every day), but with Obama's inevitable handouts and attractive investment ratios (not to mention a good pool of potential renters, albeit a lot with bad credit), I could see the low end being fairly flat by then.

[Rational Renter]

Laker, have to disagree with you on this one (and that doesn't happen too often).

I agree with the thesis that the first to fall is the first to return. It's already happening in a place like Cleveland. It is one of the first areas to return to pre-bubble pricing, because it essentially had no bubble to begin with - almost completely normal appreciation. The only way price appreciation can start happening again in an area is for that area to reach fundamental affordability levels. Therefore, the first to fall (back to fundamentals) will be the first to return.

[Buy Houses Now!]

Cramer flip-flops so many times it's hard to figure out what his actual recos are. Last year his "they know nothing" outburst was accompanied by the promise that if the Fed lowered all problems would be solved; they came through and obviously they weren't. He called the Inland Empire AFTER it happened, and was otherwise pumping financial stocks like CFC and Bear Stearns consistently.

Cramer's main function appears to be to let his hedge fund buddies load up on a position, then have him pump/tank it to his retail followers, so his buddies can execute pump-and-dumps. By all rights he should be in jail but for the ineffectual Cox SEC.

[Sing Expat]

I am still curious to know why anyone bothers to listen to politicians, economists, or Bubble Heads on TV talking ad hoc about housing prices. They are all such stinking experts, having missed the top and missed the collapse. And yet, here we are listening to them confidently call a bottom.

But more to the point, what is their argument based on? Tea leaves? Astronomy? Vested interest?

The reality is that house prices are too high for income levels. The brutal "collapse" is nothing more than an adjustment back to reality from a credit induced high. Lending standards and availability, inventory, unemployment, and recession all contribute to the fall, but fundamentally, we can't afford houses at these prices.

Now if Cramer is telling us that prices will drop another twenty to thirty percent by his target date, then I would possibly agree, ceteris paribs, with his prognostication. Otherwise, he is simply talking out of his ass.

[Pete]

He's fun to watch on TV . Follow his advice, Nah I'll /

[xtine]

Peter,

You've been the only poster since 8/21 (not including tree of the week).

Where are all your RE buddies? Did they get run out of town? Are you rejecting their celebrity home/luxury dwelling posts outright?

[Giacomo]

Cramer employs the same method as a fortune teller or pyschic -- he throws out a number of guesses and plays up his "hits," and distracts you from his misses.

Sorry to see you fell for it, Peter.

Wasn't it just a few weeks he was telling us to buy houses "NOW!!!" ? I wonder how many fools will have ruined their credit on the basis on that little performance.

And yeah, like someone else speculated, I won't be surprised if we find out he's in cahouts with some day traders. He's got his own gravity now, it would be easy to pull off.

[latesummer2009]

Sorry Jim, nowhere near the bottom on the Westside. Inland Empire, probably. Still have a world of hurt to go here as the next waves of alphabet soup toxic mortgages hit. Alt-As, I/Os, ARMs and Prime still have to work their way throught the Real Estate Snake.

http://www.westsideremeltdown.blogspot.com

[amir]

There's a big difference between the national RE market and California or LA.

His prediction that the national housing market will bottom close to the end of 2009 might be correct. However, LA was late in falling, and the nice areas were very late. So the end of 2009 might be too early, so sometime in 2010 or 2011 could be correct. But that's three years from now...

[ryanman]

Cramer's philosophy is talk loud enough and someone will listen.

[Roger Ramjet]

Jim Crammer is a complete jerk! What makes him really dangerous is he is a "true believer", Eric Hoffer style. The best thing you can do Mr. Crammer is stick your head in a toilet and leave it there.

[Eckalectic]

"He was also one of the first talking heads to articulate just how bad the housing bust was getting in places like the Inland Empire."

I almost spat my coffee all over my monitor.

Peter, are you kidding with us? What's next - Larry Kudlow is an astute economist?

Aside from the fact that anyone who listened to Cramer during the last stock bubble would be broke right now, you give Cramer way too much credit. Cramer is an entertainer, not someone to be taken seriously.

While Cramer is occasionally correct, he has as much credibility in his market calls as a trained seal at a circus - not quite where I'd want to get my investment advice.

If you want to crown somebody as "one of the first" for cryin' out loud pick Jim Grant or Bill Fleckenstein or Tanta at CalculatedRisk or Karl Denninger or any one of the many who DID see this all coming while CNBC & the Times and the rest of the media were still drinking the Koolaid.

Sheesh.

[cramer_50%]

Laker is correct in saying the first to fall will be the last to return.

The reason for this is simple, unlike stocks houses are physically located in neighborhoods where people literally have to live with their investment decision.

With RE the first places to fall are generally the less desirable locations (people migrate to these areas when priced out of the prime areas and being less expensive thaey are also easier for speculators to dabble in). In a crash, these areas therefore suffer the fastest declines as speculators flee leaving housing blight in their tracks.
This blight gives the neighborhood a "reputation" and the negative spiral continues.

Cramer was right when he said "bulldoze the excess inventory" or words to that affect. Reverse gentrification is an ugly process and attracts the wrong types.

[Laker]

: Rational Renter,
I think you misunderstood my idea. First I refer to California RE.
When i say first to go up, I mean to go up in price = appreciate.
When i say last to go down, i mean to fall in price = crash/depreciate.
Don't you agree with me that High end even as we see it today is the last segment to fall...(down or as you call it back to fundamentals) The bad areas were the first to fall down.
But you know what, it does not matter as at the end of the day, all markets will fall back to fundamentals at some point, and with loser landing again (banks will forget) and greed will once again prevail, and give easy financing to push price up again.
As we discovered, and that is a FACT, financing has 100 times the power compared to wages if you look at short term.
It is a FACT, that incomes between 2002-2007 meant nothing to prices of houses. no connection at all.

[Lou]

Cramer is a complete moron. At the start of this subprime debacle (which he didn't see coming) he was talking about how Countrywide was a great investment since they wrote good loans and not subprime loans. We know how that turned out....

[Steve Jones]

Jim Cramer
Housing bottom
8/27/2008 12:34 PM EDT
I cant believe there are still clowns out there saying that i called multiple bottoms in housing. I have said very clearly that 2009 is the year when housing will bottom. I believe 2008 is when the housing STOCKS bottom. Big big difference. Believe me, i know this. I had to buy a house because my lease is up, i know it isn't a great time, Why the heck do these silly websites that abound say that i am right now calling for a bottom in housing when i have been far less than thrilled that i have to buy a house NOW? Liars.

Position: none