• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Real Estate

Oh, Those Pesky Facts

Housing is refusing to fit into the well-worn negative story.
By JIM CRAMER Mar 19, 2014 | 11:17 AM EDT
Stocks quotes in this article: KBH, LEN

What do you do when the facts simply refuse to fit the downbeat story? One thing we know about the economy after the fall is that housing has either slowed or stalled out entirely, a victim of higher interest rates, affordability and a sense that mortgage money remains hard to come by. Plus, we've been hearing endless horror stories about one-fifth of the country that was robust, the one-fifth of the country that is California.

Then along comes KB Home (KBH), a builder that is synonymous with California, and it delivers a beat-the-band top line, bottom line, every line and number that calls into question the entire negative housing thesis. It's just inexplicable, and as much as the theorists want to throw this number to the wolves of distortion and hubris, there's nothing you can do about a stock that won't fit with the negative story.

Now, there is a component of KB Home that is intrinsic to the company, which his genuine margin expansion. We are so used to homebuilders making less and less on homes because of the high price of land and the raw costs of what goes into a home and who labors over them, that we had a kind of built-in disappointment factor.

Yet, again, KB Home puts the lie to that negative twist in part because pretty much everything that goes into a home has come down in price. Think about the collapse of copper, and the waning of lumber and sheet rock. The land was bought cheaply, as well, and in great places, and labor-price escalation is a thing of the past.

S&P/Case-Shiller, the acknowledged keeper of the housing flame with its episodic and habitually late home-handicapping, says pricing is escalating. However, the more accurate national daily sample from Zillow (Z) is showing a much lower price increases. Sorry, Nobel laureates, I am going with the boots-on-the-ground digitized empirical analysis of Zillow.

What does it all mean? First, the complex that trades with housing -- everything from Home Depot (HD) and Lowes (LOW) to Sherwin-Williams (SHW), Masco (MAS), Stanley Black & Decker (SWK) and Fortune Brands Home & Security (FBHS) -- a group that's been in pause mode, is able to trade higher. That's vital, because other than Williams-Sonoma (WSM), this housing-related cohort has been a real drag in the last few weeks. Witness how shares of Owens Corning (OC), with that company's incredibly strong quarter, recently peaked on that terrific report.

Second, there's a larger issue: We have to call into question the whole failed-housing-engine thesis that has been used to sense that housing is finished as a driver for the larger economy. Instead we must fall back to the tried-and-true Warren Buffet analogy that the household formation pick-up is secular in nature and isn't going away.

Of course, we know that the much bigger Lennar (LEN) is due to report Thursday, and perhaps KB Home is unique in its strength. But Lennar CEO Stuart Miller has been a stalwart bull even as other homebuilders had been in hope mode about the spring selling season, so I bet a one-two punch could be in order.

Housing: I's not lost. It's found. Darned facts just play havoc with what the bears had assured us would be a buttressing of the new negativity of 2014. Frustrating? How about terrific?

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long HD.

TAGS: Investing | U.S. Equity | Real Estate

More from Real Estate

Dozens of Stocks Suspended in Hong Kong Due to Problems in Accounts

Alex Frew McMillan
Apr 1, 2022 9:00 AM EDT

After missing yesterday's deadline day for filing full-year 2021 figures, many Hong Kong-listed, China-focused companies saw their shares stop trade.

Chinese Property Stocks Leap But Red Flags Abound

Alex Frew McMillan
Mar 30, 2022 9:48 AM EDT

There's a mounting list of Chinese developers that say they can't file their 2021 annual accounts in time, a likely sign of deeper trouble.

Buyer Beware on China Stocks

Kevin Curran
Mar 23, 2022 3:45 PM EDT

Intrigued by the wild swings in many of these stocks? Caution is warranted.

Let This Value Investor Take You on a Wild Ride to Argentina

Jonathan Heller
Mar 4, 2022 11:00 AM EST

From time to time when it has appeared to be cheap enough, this has been a rewarding foray into a risky world.

Is Simon Property Group a Safe Haven in This Market Environment?

Bruce Kamich
Feb 7, 2022 1:42 PM EST

SPG reports earnings after Monday's market close.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:58 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "The Tremendous Power of the Sell Button"
  • 02:46 PM EDT STEPHEN GUILFOYLE

    We're Shedding Some of This Holding on Strength

    Check out the Stocks Under $10 portfolio here!
  • 11:33 AM EDT PETER TCHIR

    Thoughts Ahead of the Fed Minutes

    Recent economic and earnings issues are convincing...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login