Cramer on BloggingStocks: Fix the home glut

"One thing is certain: We still don't have a clue about how to stop home price declines."

Home prices will stop declining once they hit 2000-2001 levels, thus becoming affordable again. (viable)

Or, if all Americans have their wages increased by 30% +/-, home prices will stabilize. (not viable)

In my own mind, I think of the toxic mortgage bonds as chopped-up fruit salads, sold as good fruit but which included some rotten apples.
I have a difficult time wrapping my mind around the CDOs. Insurance that wasn't sold as insurance? Huh!! Help me out here!!

Like it or not.. US needs to encourage immigration of people with sufficient net worth .. to take up all the housing stock

"I have a difficult time wrapping my mind around the CDOs. Insurance that wasn't sold as insurance? Huh!! Help me out here!!"

http://useconomy.about.com/od/glossary/g/CDOs.htm

http://www.danaharta.com.my/default.html

Cramer here is a tip.. how to solve the issues.. all the way form a little country in Asia

The solution is more straightforward and sensible than burning down houses. Each Collateralized Debt Obligation or Credit Default Swap relates to a financial instrument, whether a company bond or a morgage or any other instrument.
The fact that more CDS were sold than there are instruments means that many of these were pure speculative 'bets'. Well, if your bookie dies or goes broke, you probably won't get paid. The govt should declare that it will cover the actual loss by the holder(s) of the instruments; all others were illegal gambling and claims are void. Let the chips fall where they may.

The housing deflation will end when it is deflated. Will it be painful? Hell, yeah. Depression? Possible. Stagflation? Probable. Like Japan in the eighties, we flew the same flight plan. We will land at the same airport.

Jim, you are losing it. The market has to correct itself. When housing comes down to where people can afford to buy a home with 20% down and afford the payments and property taxes then the world will right itself. All this bailout bullshit is a waste of money

jim,

i know that you ran a hedge fund but why are you still a shill for them. until the govenment moves to address the mortgages inside the CDOs we are in deep doo doo.maybe the assist for AIG should be tied to opening the CDOs if the guys who bought default insurance want any payoff

As for you suggestion that banks should cut off homebuilders, you are nuts. builders who are still alive are the big publics-the others are already dead.the publics are still paying interest and employing plenty of people, albait at a significantly lower level than last year. you suggestion would mean almost as many layoffs as shuttering GM. get a grip man

any asset overshoots to the up and the down and then revert back to the mean. This is simple. Why does anyone think that it would have been good for home prices to appreciate at a 5 to 10 percent clip to begin with? What good would that have done? Someone said encourage immigration? yea sure. Its the financial illiteracy of this nation that got us into this mess. I know JC said burn em. Hey. At least he is thinking outside the box! May not be right, but thats what its gonna take.

Down here in the trenches as a real estate broker with three offices covering 12 counties in PA from the MD line to the northeast corner of the Poconos, my take is a bit different. The real estate business needs to be primed from the bottom UP. We need solid FHA or other financing made available to consumers with lower credit scores than 600. Give them a higher rate, but lend to them. We need these people to buy the properties at the lower end so the next level can move up and so on.

On the CDO's and all the other alphabet jibberish---I may be too simple to understand the overall problem, but what makes sense to me is this:

If I lend 100 people $100 each and I know that 10 of them are NOT going to repay me, I can calculate that I need to cover 10% of the gross I lend over the remaining 90 people to make up that loss. So I need to charge them all enough to make sure that happens. The banks are surely able to price in the risk. For them they won't actually lose all the money as the house can still be sold to recover a portion of the loss. So instead of 6% for the mortgages charge 9% or whatever mathematically makes sense. BUT the KEY is we need to lend to the "credit challenged" and self employed if we want to EVER see light at the end of the tunnel. Raise the rates and open the gates to lend the money. IMHO

I have been an appraiser 30 years in Cleveland, Ohio. Yes you may light a candle for me.

I now know so many people on the bubble" of throwing in the house and moving to a luxury apartment on Cleveland's Gold Coast. These friends have always lived large. A mortgage that now is upside down only gives them encouragement to finally get the granite counter tops and a valet to bring the groceries from their car up to their unit.

Jim,

Someone took your advise.. good part is the insurance is paying for the balance @ foreclosure value.. sad part is they still owe the bank for the difference..


Fire destroys 100+ homes, injures 4 in SoCal town
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By THOMAS WATKINS, Associated Press Writer – 6 mins ago

AP – A mansion burns in the foreground as another burns in the background during a wildfire, Friday, Nov. …
Slideshow: California Wildfires
Play Video Video: Raw Video: Wildire in So. Cal destroys homes AP
Play Video Video: Winds Fan Flames In Blaze Near Montecito CBS 2 / KCAL 9 Los Angeles
SANTA BARBARA, Calif. – Firefighters were racing early Friday to push back a wind-whipped wildfire that destroyed at least 100 homes and a college dormitory, injured four people and forced thousands to flee the longtime celebrity hideaway of Montecito.
The fire broke out just before 6 p.m. Thursday and spread to about 2,500 acres — nearly 4 square miles — by early Friday, destroying dozens of luxury homes and parts of a college campus in the foothills of Montecito, just southeast of Santa Barbara. About 5,400 homes in the tony community of 14,000 residents were evacuated and more people could be forced to flee if the fire spreads, said Nicole Koon, a spokeswoman with the Santa Barbara County Executive Office.
"We believe 100 plus homes have been destroyed," Koon said. "It's our best guess at the moment because it's dark. We're not counting as much as trying to protect the homes."
At Westmont College, a Christian liberal arts college nestled amid wooded rolling hills, some 1,000 students were caught off-guard by the rapidly moving flames.
"It came pretty fast," said Tyler Rollema, a 19-year-old sophomore who was eating dinner in the cafeteria when students were told to head to the gym. "We came out and it was just blazing."
Thousands of feet above the flames, footage shot from television helicopters showed what initially looked like a massive campfire with dozens of glowing embers. When cameras zoomed in, however, what appeared to be flaring coals turned out to be houses — many of them sprawling estates — gutted by flame. Palm trees were lit like burning matches.
"It looked like lava coming down a volcano," Leslie Hollis Lopez said as she gathered belongings from her house.
About 500 firefighters were trying to stop the flames from marching farther west to dense neighborhoods in Santa Barbara. Santa Barbara City Fire spokesman John Ahlman told KABC-TV he spotted about 20 homes burning Thursday night in the city.
About 200 people spent the night at an evacuation center at a high school in nearby Goleta, but rest was out of the question for Ed Naha. He was worried about his home in the hills above Santa Barbara.
"I don't think we are going to have the house when we go back," Naha said.
The 58-year-old writer had been home working on his computer when smoke blanketed his house. He gathered his insurance documents, his wife and two dogs and left as flames approached his neighborhood.
"We are used to seeing smoke because we do have fires up here, but I've never seen that reddish, hellish glow that close," he said. "I was waiting for Dante and Virgil to show up."
Fire officials planned an aggressive attack from the air at daybreak Friday with the help of nine water-dropping helicopters and 10 air tankers, said Terri Nisich, another spokeswoman with the Santa Barbara County Executive Office.
The injured included two firefighters who suffered smoke inhalation and two residents taken to Santa Barbara Cottage Hospital with substantial burns, hospital spokeswoman Janet O'Neil said.
The fire was fanned by evening winds known locally as "sundowners," which gusted up to 70 mph from land to sea late Thursday. Around sunset, winds shift from the normal onshore flow of cool, moist sea breezes and push downhill from the Santa Ynez Mountains.
The winds weakened overnight, with gusts reaching from 17 to 25 mph, said Jamie Meier, a meteorologist with the National Weather Service in Oxnard. "We're expecting conditions to improve for firefighters on the lines, but it will still be warm and dry through tomorrow," she said.
The fire temporarily knocked out power to more than 20,000 homes in Santa Barbara, Southern California Edison spokesman Paul Klein said
At Westmont College, the air was dense with smoke and the scent of burning pine. Flames chewed through a eucalyptus grove on the 135-acre campus and destroyed several buildings housing the physics and psychology departments, a dormitory and at least one faculty home, college spokesman Scott Craig said.
"I saw flames about 100 feet high in the air shooting up with the wind just howling," he told AP Radio. "Now when the wind howls and you've got palm trees and eucalyptus trees that are literally exploding with their hot oil, you've got these big, red hot embers that are flying through the sky and are catching anything on fire."
Hundreds of students fled to gym, where they spent the night sleeping on the floor. Some stood in groups praying, others sobbed openly and comforted each other.
Beth Lazor, 18, said she was in her dorm when the alarm went off. She said she only had time to grab her laptop, phone, a teddy bear and a debit card before fleeing the burning building.
Her roommate, Catherine Wilson, said she didn't have time to get anything.
"I came out and the whole hill was glowing," Wilson said. "There were embers falling down."
Montecito, a quiet community known for its Mediterranean-like climate and charming Spanish colonial homes tucked behind lush front yards, has long attracted celebrities such as Michael Douglas, Rob Lowe and Oprah Winfrey, who owns a 42-acre estate there. The landmark Montecito Inn was built in the 1920s by Charlie Chaplin and Fatty Arbuckle, and the nearby San Ysidro Ranch was the honeymoon site of John F. Kennedy in 1953.
Publicists for Lowe and Winfrey told the AP the celebrities' homes had not been destroyed and neither was not staying in the area Thursday night.
Montecito suffered a major fire in 1977, when more than 200 homes burned. A fire in 1964 burned about 67,000 acres and damaged 150 houses and buildings.
___
Associated Press writers Greg Risling, Denise Petski and Daisy Nguyen in Los Angeles contributed to this report.
(This version CORRECTS that 5,400 homes have been evacuated.)

The ONLY way to cut through the CDO tangle is to press your Congressman to pass a bill changing the 2005 Bankruptcy Code changes (ghost-written by attorneys hired by MBNA Bank, incidentally) that would allow bankruptcy judges to unilaterally re-write mortgage Notes as to principal and interest. They already can do this for commercial properties, and even vacation and second homes and homes held as rentals, but NOT for primary residences. Once the Code changes, then the borrowers have leverage against the CDO outfits to re-formulate their Notes. If the CDO does not, then the bankruptcy court judge will - and probably on worse terms for the CDO. That gets the properties out of the foreclosure mill and stabilizes the housing market. So press your Congressman!

Yes, I have an axe to grind here. Some clown "bought" my Note for ten bucks, registered it on the land title records, and is trying to "foreclose" it for $375,000. Not bad for a six-month purchase cycle. He is being sued, of course. But that is another story.

Cramer and the rest of you guys are totally clueless. Consumers with empty pockets cannot buy enough to move any part of the economy forward. ZERO interest rate auto loans and huge rebates have not helped new auto sales. Thus it is reasonable to conclude that even ZERO interest home loans would not help home sales either. Everything is going to go down the tubes. It cannot be stopped.
The same way we see vacant factories and mills all across the USA today___tomorrow we will see vacant stores and vacant malls and vacant office buildings all over the USA. We the people together gave away the industrial base and wealth of the USA since 1970 when we began buying more imported products than we produced. No country can survive by selling service to each other. The economic disaster ahead will be of Biblical Proportions and effect every nation on the entire planet. A Black Hole, an Abyss lies ahead for many decades to come.