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Cramer: How to Save Housing

President Obama may have a plan for unemployment, Cramer said Monday, but number 44 better focus on housing, too. The market action today showed that Wall Street is a bit more concerned with the latter than the former.

The Dow finished the day up 38 points after a 6.5% increase in December existing home sales seemed, at least slightly, to outweigh the layoffs at Caterpillar , Home Depot and Sprint Nextel . These two forces have been attacking the market from both sides, as the bad news from one killed the forward momentum generated by the other. But the focus on housing Monday, Cramer said, was an indication of just how crucial that sector is if we’re ever to get a sustained rally, one where financials, commodities, industrials and retailers can be bought.

President Obama’s stimulus package will attempt to reduce unemployment, so that problem seems covered. What Cramer wants is a federal initiative to promote home buying. Give buyers a one-time tax credit to draw people into the market. That way we have the solid, long-term ownership that will stabilize the sector, rather than speculators picking away at foreclosed properties they’re hoping to flip.

Such a tax credit, in combination with continued lower mortgage rates – as the feds buy more toxic mortgage paper – would make up the difference in down payments and help banks trim the losses incurred from existing loans. Then these banks would have some capital to start loaning again.

In order to keep the market moving forward, we need to save housing. And this, Cramer said, is how we should do it.








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