Our own Jeff Miller was checking out a CNBC story on Bloomberg.com when he found some strong support for aggressive plans that Obama has in the works for the housing market. What follows below is his post from earlier today on TheStreet.com’s Real Money.

Obama and Housing
12/16/2008 12:25 PM EST
President-elect Obama is meeting with his economic team today. CNBC reported that they are contemplating the Hubbard-Mayer housing plan. Bloomberg stories suggest that Larry Summers has been talking with them and that Obama advisors have “embraced” the plan, already on a fast track at the Treasury.

The proposal would provide a 4.5% fixed rate loan to just about anyone. It would address those under water, probably by “splitting the difference” with lenders. New home buyers could borrow up to 95%.

The calculation of housing inventory is done by taking existing homes and dividing by the rate of sales. The pessimistic predictions of how long it will take to work off inventory result from this exercise in long division.

In fact, the rate of family formation (call it latent demand) has exceeded new construction. Anything that steps of sales would instantly cut the months of inventory. So would a plan that reduced foreclosures.

I am not writing to endorse the plan. I am aware that six or eight of my astute colleagues here will instantly hate this program, opining that it is repeating old mistakes, delaying the inevitable, etc. In fact, no one is omniscient. We cannot say what is the correct level of home prices or the correct amount of leverage.

Whether one likes this idea or not, policies like this will be the new reality. This is especially true when top conservatives like Hubbard are on board with Summers. My sector ratings flipped to a “buy” on the home construction group (ITB) on December 5th, and it is now at the top of our 57-member ETF universe. Our methods are based on technical criteria, but it is always interesting to monitor events that create the message of the market.

Position: Long ITB