Cramer Calls Bottom

Yesterday, Jim Cramer of CNBC's Mad Money called a "bottom" to the housing market. He relied on certain economic indicators released that day including, but not limited to, increases in building permits and housing starts nationally. Cramer reasoned that the large home builders, as well as the banks financing their projects, are some of the most well-versed institutions regarding the real estate market. Their expertise, coupled with the risk aversion under which they have recently been operating, makes it extremely unlikely that they would risk incurring additional losses resulting from excess inventory. These institutions are simply not interested in compounding their exposure to a declining market. (Source: CNBC)

While Cramer's argument is cogent, I fear that many pockets of the real estate market (including the area in which my company operates) currently have excess inventory and cannot afford additional new home construction. At this point and time, many local markets have between 8 and 11 months of inventory available. My opinion (and that of many experts) is that 6 months of inventory would represent a healthy market. With that said, I am partial to Cramer's position, as a bottom is obviously necessary prior to any rebound in real estate.

A few odds and ends:

If you are preapproved for a mortgage and have not checked in with your lender/broker in the last two weeks, you should do so. Rates on 30-year fixed mortgages increased from roughly 5.0% to 5.8% last week. A swing of that magnitude is significant. You should keep yourself apprised of mortgage rates, as they directly affect your buying power.

If you are a first-time buyer who is depending on the $8,000 first-time buyer tax credit, keep in mind that it is due to expire at the end of November. Also, note that there is a phase-out depending on income level, which may affect your eligibility for the credit.

As always, feel free to contact me at any time with respect to the real estate market and your particular needs.