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Cramer: The US Housing Recovery Has Just Begun

U.S. stocks faded in the final minutes of trading to close mixed Thursday, though the Dow Jones industrial average managed to snap a six-day losing streak. It seems investors remain cautious as many negatives plague the market today, including everything from Europe’s ongoing debt crisis to falling commodity prices and an economic slowdown in both China and Latin America.

Jim Cramer
Jim Cramer

To “Mad Money” host Jim Cramer, though, there are a few bright spots in the otherwise blighted economy.

“I want to point out the most positive sector right now because when the market's this oversold and you have this level of negativity, the possibility of owning stocks with good fundamentals just becomes too great to pass up,” Cramer said. “There are too many companies doing well to just toss up our hands and hide in cash, even if Europe's misery keeps damaging the global economy.”

The real leadership in today’s market is housing, Cramer said, noting most housing-related stocks are pushing higher.

Take Toll Brothers , for example. The Horsham, Pa.-based homebuilder’s stock is up 31 percent year-to-date and continues to hit new highs.

Speaking of homebuilders, Miami-based Lennar saw its stock jump by more than 40 percent this year. Shares of both PulteGroup and DR Horton are marching higher, too. All of these homebuilders are reporting strong sales and earnings numbers, Cramer said.

The fall of the housing market lead the greater economy into the Great Recession, Cramer said. So with the homebuilders continually hitting new highs, he thinks housing is turning around, which could boost the overall economy. After all, building and buying a house is an involving process.

Homebuilders have to buy wood, appliances, dry wall, roofing plumbing and electric products. Companies that supply these products are beginning to recover, but their stocks would have to climb considerably before reaching pre-recession levels.

In the lumber industry, Cramer said Louisiana-Pacific reported its first strong quarter in some time. Weyerhaeuser is doing fine, too.

As far as plumbing goes, Cramer said many investors have given up on Masco , even though its stock has performed well lately. Cramer likes Fortune Brands Home & Security , even though it’s flirting with its 52-week high.

When it comes to paint, Sherwin-Williams’ stock has soared while DuPont’s stock has lagged. DuPont is also engaged in insulation, which is an area Owens Corning specializes in. To Cramer, all three stocks seem cheap.

Meanwhile, loans are needed to buy a home. Both Wells Fargo and U.S. Bancorp recently reported strong quarter, but Cramer said they’re still not getting the respect they deserve.

Home insurance provider Travelers has been hitting new highs lately, but Cramer thinks it’s still cheap.

So what’s the bottom line?

“We're still in the early innings of a nationwide housing recovery so there's a lot more room to run,” Cramer said. “They may have too many homes in Spain, Portugal and Ireland, but here? We just aren't building enough of them.”

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