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The Bottom Line!:     If you think the home improvement market is improving, the stock to own is Lowe's (LOW), not Home Depot (HD).

Jim:    When can housing bottom?...

That's the $52,000 question... it's the one everyone asks me, because I believe we need housing to bottom, before we can start seeing the economy roar again...

So, when will it happen?... When have I been saying it will happen?...  When have I been consistently saying it will happen?... 

On the record, I say the third quarter of next year... we will be going back... we will have bottomed... a year from now.  And, yeah...  I'm being precise.  Why?...

I have ten reasons why it could happen...

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But first, why am I even bothering to call the bottom now, one year out?...

You have to do it that way, because I think you can't ignore the stock action... You can't turn a blind eye to the bottoming process of the stocks...

That means talking about a subject that I usually avoid on this show... not because it's really hard to get good charts... but the charts do show something... they are just too obvious when it comes to the housing stocks...

The charts are fabulous predictors whenever they are doing something en masse... when you see all the housing stocks peak, or when you see all the housing stocks bottom...

To me, or to anyone frankly, they're telling an accurate story...

So let's do something I typically don't do... let's go to the charts of the seven most important homebuilders in the United States from January of 2005, to show you what I'm talking about...

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Look at the charts of:

Pulte (PHM)
Toll Brothers (TOL)
DR Horton (DHI)
KB Home (KBH)
Lennar Corp. (LEN)
Centex Corporation (CTX)
MDC Holdings Inc. (MDC)

Remember, this is a five-year chart, okay...

Now, you can see the pattern so clearly by going back on a five-year chart... These stocks... I mean, this is incredible. It's very rare that you see it this crystal clear... These stocks peaked right here (pointing to the top point in the chart for all of the listed stocks together). There is no issue. This is no more difficult than seeing the peak of Mount Everest...

These stocks peaked one year before housing hit the wall... one year... one year before the July 2006 beginning of the end... They nailed the top one year in advance... these stocks screamed that we were at a top...

And I am now telling you that they are screaming that we are at a bottom...

Now you've got what I've got in my head. They've clearly bottomed in July. So, here... why should we think they are wrong now, when they were right back then?...

These stocks predicted something. I mean, it was unbelievable how right they were in 2005, predicting the 2006 top...

How can I say they won't be right in 2008, predicting the 2009 bottom?...

Do not discount the charts as being pure hocus-pocus... It's not!

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Now usually my experience is that stocks predict things out six months... If you went and looked at a chart of Exxon Mobil (XOM) for instance, six months ago... you would see that it was predicting precisely that oil would peak at $140. Boom! Just when it peaked, okay...

Now, meaning that, if look at stocks as an indicator of where a business or the economy will be, typically in six months, they'll steer you right most of the time... So stocks usually let us see six months into the future...

But I did not say that housing will bottom in... six months. It's going to be 12 months. The truth is, I'm being more cautious here, than what the stocks usually say, because housing's been such a hard call. I think I'm being conservative. I don't want to be premature. It's too ghastly out there... especially since it took a year between when the housing stocks peaked in 2005, and the housing business peaked in 2006. I think the trough will take a year too.

So, once again, let's understand, because there's been a lot of misinterpretation of my call... and I read the websites and I know what people are saying... they're saying, he's calling a bottom again... No. I have consistently said that the bottom is out a year... I wanted to show you exactly what I saw in the charts... how the stocks told me, boom! In 2005, how we were headed to a peak, and now, boom, how in 2008, they're telling me we're heading into a trough in 2009.

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Now, how about my credentials?...

I have been an inveterate bear when it comes to housing. In 2005, on this set, I had loud disputes with the heads of almost all the major housing companies, when I was calling a top... Two of them got two heated and there were incriminations. These people who ran these companies in 2005 could not have disagreed with me more. They were bullish. I was looking at the charts and the peak, and I said, something's wrong here. On air, last year though, I promised... when everyone felt that things could be bottoming... I guaranteed, both on the Today show and here, that you would lose money if you bought a house... last September...

By the way, that sparked a gigantic letter-writing campaign by the National Association of Realtors to get me fired... I understand that. I probably would have tried to do the same if I was in real estate... I would have said I've got to get that guy Cramer to shut up. I get that. That's okay. I'm a big guy. I don't mind people coming after me. But you've got to understand... you've got to understand that no one else came on your air and said, you will lose money with your house, because they were either too politically correct, or they feared people. I don't. My credentials are clear. And for those of you who are spoofing me and chiding me... that's a constant... I look at the critics. I know when they're louder than a Who concert... but I urge you, after what I told you... I risked being fired after telling the truth about housing... I risked being the wrath of all these CEOs who I'm supposed to be trying to be friends with, which I'm not... and now I am telling you that you can laugh all you want at me, but the charts are not lying... I urge you to find someone with better bonafides on housing who is in TV or who is in real estate... Try it. Try it...

Now I am saying that one year out that we will get a bottom... How can that be so heretical, really though?... How can it be so dumbfounding?...

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Listen, besides the charts and their forecasting abilities, I've got 10 fundamental reasons why I think housing will bottom in the third quarter of 2009...

1. We're building far fewer homes than we used to.
In 2005, we were building far more homes than we should... When those charts were peaking, we were putting huge numbers of houses... twice the number of houses they're building now they were building in 2005. That was a heads up.

2. How about the housing bill that authorized $300 billion in FHA loans?
No one even seems to talk about that. That will give troubled homeowners a chance to stay in their homes. The FHA is going to take your terrible floating-rate loan with a high rate, and give you a loan with a fixed rate that will be cheaper, so you can work it out and stay in your home.

3. Prices have come down to the point where there are actual bargains.
We saw some numbers yesterday, down an average of 7%. We saw some other numbers today from S&P that are down huge. We're talking about homes being down 30-40% in the hardest hit areas... and I believe, in a year, they'll be down 50%. So you're worried about a down payment? Well, wait a second... well, guess what, when the house is $200,000 (instead of $400,000), you don't have to put up that much. The S&P housing numbers we saw today are breakout. They were showing 25% declines in many areas... a reduction that makes housing affordable, at last, compared to renting... and, in my bottoming scenario, they will be more affordable next June and July.

4. The last holdout markets - think New York - seemed to have peaked a few months ago.
The Hamptons are down big. I am looking in the Hamptons, and I hate the Hamptons... When the last area rolls... I'm seeing the bottoming process starting in earnest.

5. Right now, mortgage rates are going up month-to-month. That's a bummer. But, if and I think this is more of a when... FNM and FRE get nationalized, rates should go down, making it cheaper to buy a home.
This is a sticking point. FNM and FRE must be nationalized. Now we know from Barron's that there's a plan to do this...

6. The bulk of the reckless loans... you know, the ones with the low teaser rates... they're going to reset in the third quarter of this year.
Because they peaked in the third quarter of 2006, when the wall was hit. The number of mortgages changing to a much higher rate will be down from here... Down from here on out, so the rate of foreclosures should slow dramatically next year. That's how you get a bottom.

7. There's such a thing called household formation.
There are about 860,000 new households that get formed every year. Listen, there are 4 million babies born every year in America... we've got the divorce thing going on... we've got 2.5 million new citizens. All of these things create demand... These people have been camped in apartments, saving up for down payments long enough! How long can you live with your mother-in-law! Alright, that trumps any housing crisis... take it from me.

8. Immigration.
It has been at a million people per year, but that number got a big haircut, because of the presidential crackdown. It should grow back with the new president, be it McCain or Obama, both of whom are more immigrant friendly than the current guy.

9. The biggest problem in areas for housing are contained, now that California, Florida and Arizona... it's not spreading.
In fact, lots of regions stopped going down, or they're just going down fractionally. The big losses are apparently being cordoned off.

10. The worst areas... Bradenton in Florida, the central valley of California... they've bottomed.
They bottomed a couple of months ago. They were the areas with the most foreclosures. The first to fall is usually the first to return. Next I think we will see Miami and the inland empire, which is really ground zero, bottoming. Then we are going to be in the third quarter of 2009, and I believe that the bottom will be at hand for everything.

Here's the bottom line...  

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The Bottom Line!:     I am reiterating my stance that housing will have bottomed by this time next year.  "In Charts I Trust"... so let's start the countdown...  We've got 309 days until June 30th of 2009.  We've got 309 days until housing bottoms, and I will eat this cardboard if I am wrong...