Jim Cramer's RE Rx

Cramer: 'Home Buyers Need a Bigger Carrot'

In the financial community, Mad Money's Jim Cramer is known for being a showman first, and for prescient market calls a very distant second (his manic, shotgun approach to stock picking seems to be if you throw enough darts, sooner or later a couple are bound to hit the bull's eye).

That said, no one ever called him dumb (he's actually a Harvard Law grad, worked for Goldman Sachs, and is an idea machine). And once you strip out his individual stock picks, his market analyses are often insightful.

So what's his prescription for fixing the housing market?

First, making it the number one economic priority. Here's Cramer's logic:

Everything comes down to housing. The wealth effect, a function of house values and portfolio values, is being gutted by both. You can't fix stocks -- they are reflective of earnings -- but if you stabilized home values, you could get some confidence, particularly given the collapse in oil. Stabilize housing, and you get a positive trend in consumer spending.

--Jim Cramer, "Housing Needs a Tax Credit"

The centerpiece of his proposal is a massive ($25,000) tax credit for home buyers. Cramer also calls for dramatically lowering interest rates, and for a shakeout amongst the national builders.

In fact, all of the foregoing proposals have already been floated in one guise or another (a $7,500 tax credit is already law, though few Buyers seem to have noticed). What's notable about Cramer's approach is the scale and urgency.

In that respect, Cramer joins a growing list of (calmer) pundits, including Thomas Friedman, calling for some variant of "shock therapy" to address the ongoing housing and credit debacle.

As big banks absorb ever-greater mortgage losses, their arguments are gaining traction.