Be prepared to pounce on home building stocks when they drop

CNBC’s Jim Cramer said Thursday that despite conventional wisdom, he thinks investors should buy homebuilding stocks the next time they fall.

“I think these stocks are going to go down further, but when they do — and it could be on a statement from the Fed that they’re still seeing signs of inflation — I think you need to pounce,” the “Mad Money” says the host. “That could be as soon as the next rate hike.”

Homebuilder sentiment fell to a two-year low on weaker demand and higher costs in May. Mortgage rates rose sharply this week after declining in recent weeks, as house prices also continued to rise.

But Cramer says there are bullish signs for the market suggesting that despite the Federal Reserve preparing to tighten the economy, homebuilding stocks could go against the grain and be attractive assets for portfolios. investors.

He pointed out that the pandemic has changed the landscape of the homebuilding industry, leaving downtown offices empty due to working from home, inflating the bank accounts of potential buyers and leading to a baby boom that could mean more business for residential construction companies.

In addition, skyrocketing rental prices have prompted some people to invest in houses rather than signing a lease, while the limited supply of houses has prevented property depreciation and led to bidding wars between potential buyers, he said.

“We’ll have more downgrades and maybe even estimate reductions, but when they come I’m going to go out on a limb here and say now is the time to buy the homebuilders,” Cramer said. .

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