Fears of a Housing Crash? Jim Cramer Says: ‘Wait’ – These Developer Stocks Might Surprise You

CNBC’s Jim Cramer is bullish on construction companies despite recent stock performance.

Cramer reviewed Lennar and KB Home’s earnings reports, which were released last week. While Wall Street favored KB Home, Cramer expressed optimism about both companies and the housing sector.

“Interest rates may remain high, but the housing shortage remains a significant factor,” Cramer said.

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Cramer noted a seemingly contradictory market pattern — homebuilder stocks rose earlier this year on expectations of lower interest rates, but have since stalled on a more cautious approach from the Federal Reserve.

Although Lennar and KB Home shares beat Wall Street expectations, Cramer identified factors that made investors more cautious about Lennar.

He noted concerns about Lennar’s guidance, which seemed mixed. Management cited “increased sales incentives.” That could signal a less optimistic view of housing demand. Lennar’s proposed split could raise concerns about the company’s long-term housing prospects.

Meanwhile, KB Home shares rose after it raised its full-year revenue forecast for the property. Cramer noted that KB Home had not extensively discussed using incentives to boost sales, which some investors viewed positively.

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Cramer said he prefers KB Home’s approach and is more bullish on Lennar than Wall Street analysts. He noted that the companies are taking different paths:

• KB Home prioritizes price stability over volume maximization. This suggests they are less concerned about accumulating excess inventory.
• Lennar is more focused on managing inventory levels. That translates to higher deliveries and order fulfillment.

“If there is some relief on the interest rate front, Lennar’s results suggest that could attract a new wave of buyers, which is why I think the housing bull market is far from over,” Cramer said.

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