CNBC's Jim Cramer said Thursday the strength in the housing market is a welcome sign for the beleaguered U.S. economy — not the red flag it was in the years preceding the financial crisis.
Earlier in the day, the Commerce Department released data showing that in December, housing starts increased 5.8% to a seasonally adjusted annual rate of 1.67 million units. It's the highest level since September 2006.
"Fourteen years ago, this same strong single-family homes number spelled disaster because the housing boom was the root cause of the Great Recession, though that was still a couple years away," the "Mad Money" host said.
Some people are suggesting that the present strength in the housing market could be creating another bubble, but Cramer said he believes it's much different this time around. "A booming housing market is good, even if the last one ended horribly," he said, noting the ripple effects housing has into the broader economy.
"It punches above its weight," he said. That's especially important now because the Covid pandemic has devastated key service industries such as hospitality and travel.
For starters, Cramer said he sees the housing strength as a positive, not a problem, because mortgage standards are much stronger now than in the early 2000s thanks to reforms made after the financial crisis. Moreover, he said household balance sheets are in a better position after saving rates climbed during the pandemic.
Other factors serving as fuel for the current housing market are also related to the coronavirus crisis, Cramer said, particularly around the embrace of remote work and schooling. That has made it easier for people to move farther away from their office or simply created the need for more space within the same geographic area.
Or, Cramer said, even if people aren't moving to a new home, they could decided to do upgrades or remodels to their current residency — another boost to the economy evidenced by the strength in the stocks of companies such as Lowe's or Home Depot.
"Then there are the retailers that help you furnish and decorate, along with the devices makers and video game plays and computer companies like Hewlett-Packard, Dell and Apple. They're all benefitting from this fantastic housing number and from the hybrid work style."
The ripple effects of a hot housing market don't end there, Cramer added.
"People are buying homes in the suburbs or the country and when you do that, you need a car. That's why CarMax is the third best performer this year, and GM is the No. 1 performer in the stock market," Cramer said, contending the strength in General Motors is not solely due to its electric vehicle transformation. "I see an auto boom coming."
Eventually, Cramer said Covid vaccinations will be rolled out broadly in the U.S. and the service sector of the economy will pick back up. Money that is currently being spent on the housing sector and its related areas will be spread out more diffusely.
"There will come a day when we can go back to being a fun service economy, but we are so not there yet. Think of the housing boom as the bridge that helps get us there," Cramer said.
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