GO
Loading...

Congress: The Housing Recovery’s Worst Enemy?

Monday, 15 Mar 2010 | 7:10 PM ET

Washington has chosen the homebuilders over homeowners, Cramer said Monday, and the decision is causing far more foreclosures than any government program could ever prevent.

Tucked away in last November’s extension of the first-time homebuyer tax credit is a provision that lets the homebuilders use any losses incurred during 2008 and 2009 to retroactively offset the taxes they paid on profits earned over the past five years. This has turned companies once on the verge of failure into profitable institutions, and they’re using the money to build more houses.

That’s wrong, Cramer said, because we need fewer new homes right now, not more of them. The increased supply is hurting prices overall, and that’s keeping a huge number of mortgages underwater. In effect, this homebuilder bailout is making it virtually impossible for homeowners to get back on their feet.

Outrage of the Day
Cramer sounds off on the thing that irked him the most about the market.

Look at the tax credits these companies received, despite every one of them losing money in the previous 12 months before the bailout: Hovnanian , $291 million; KB Home , $101 million; Pulte , $800 million; DR Horton , $149 million; Beazer , $101 million; and Standard Pacific , $94 million. These guys lobbied hard – Pulte spent $220,000 to influence lawmakers – and it paid off.

But not for the rest of us, Cramer said, taxpayers included. While some companies must be saved, others don’t deserve to be. And if basic capitalism were allowed to play itself out in this situation, the weaker firms would have died off, saving us $1.54 billion in tax credits to those six homebuilders while at the same time pushing up prices.

And only home-price appreciation will solve the housing problem, Cramer said. Too bad Congress seems to be its worst enemy.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

  Price   Change %Change
BZH
---
DHI
---
HOV
---
KBH
---
PHM
---
SPF
---

Featured

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.