U.S. stocks would be at new highs, maybe even all-time highs, if it weren’t for concerns over Europe’s ongoing debt crisis, said Jim Cramer on CNBC’s “Mad Money.”
After all, stocks erased most of their gains to finish flat Tuesday following reports that former Greek Prime Minister Lucas Papademos said preparations for Greece's exit from the eurozone are being considered. If it weren’t for Europe, though, Cramer thinks stocks would be trading at much higher levels thanks to an array of positive data points.
To start, Cramer noted that the U.S. housing market seems to be turning around. Existing home sales rose 3.4 percent to an annual rate of 4.62 million units in April to their highest in almost two years, according to the National Association of Realtors. To Cramer, the results were nothing short of astonishing.
The National Association of Realtors also indicated that “a diminishing share of foreclosed property sales is helping home values.” It also said that, “an acute shortage of inventory in certain markets is leading to multiple biddings and escalating price conditions,” with tight supply in Miami, Naples, Fla., Phoenix and Orange County, California.
“Nothing speaks more strongly of a turn than when the hardest hit areas are now not only back but in incredible demand,” Cramer said.
For that good news to happen, Cramer noted that a number of things had to happen. The glut of unsold homes had to be purchased, for example. Then, the inventory of foreclosed homes had to shrink. It also means that jobs had to return to the hardest hit areas, so that people could qualify for a mortgage and purchase a home. The homes needed to be affordable, though, and the prospects of an increase in price needed to be so evident that sidelined buyers would step up to the plate. Also, the buyers needed to believe that they can commute from these areas, many of which are far from major employers, without having to spend a lot on gas. Finally, the banking system needed to allow people to get credit so they can buy.
In turn, an improved housing market will give a boost to companies across the board, Cramer said. If a glut of unsold homes is gone, the homebuilders can start on new construction. Fewer foreclosures will help the banks, he added. Of course, with new homeowners comes increased spending at home improvement retailers, like Home Depot, and home furnishings retailers, such as Bed Bath & Beyond.
So what’s the bottom line?
“It’s important, now and then, to recognize that if Europe didn’t matter, we’d be much higher than we are right now,” Cramer said. “Sadly, it does matter, which is why I insist you stay local on as much of your portfolio as possible.”
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