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Cramer Puts Pulte Homes Back on the Market

“Housing has stabilized,” Cramer said during Thursday’s Mad Money, “but that doesn’t mean the homebuilders have.”

Prices haven’t yet reached a level where these companies can make money, which is why he urged investors to sell Pulte Homes , “the most dangerous of the homebuilders,” Cramer said.

The first warning sign against owning this stock is Pulte’s balance sheet. The company finished the most recent quarter with $1.5 billion in cash, $1.98 billion less than the previous report, and was not in compliance with the tangible net worth covenant of $2 billion under its revolving credit line. Cramer also criticized Pulte for paying an extra $1.4 billion for Centex’s intangibles – its brand name, customer relationships, etc. – as part of its acquisition deal. That was nearly double the expected amount.

Pulte has a number of other problems as well. The company’s key demo – retired and semi-retired Americans – watched their retirement accounts disappear during last year’s crash. And the real estate decline has reduced the value of their homes, thereby making it virtually impossible to buy new properties from Pulte.

Homeowners are suing Pulte, too. The claims? Plaintiffs say, among other things, that the company put buyers in loans they couldn’t afford in order to get above-market prices. Cramer called the charges “an albatross” for Pulte.

Lastly, Cramer pointed to Pulte’s latest quarter as further proof the stock can’t be owned. Not only did the company report a larger-than-expected loss, but also cancellations climbed to 23% from 21.4% last quarter.

“That doesn’t inspire any confidence,” Cramer said, “especially when the cancellation rates from most homebuilders are going the other way.”

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