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"We've seen homebuilder after homebuilder report genuinely good results and then their stocks just absolutely got obliterated," the "Mad Money" host said. "Pulte[Group] posted better-than-expected headline numbers, but there was also some weakness, like first-time orders down 13 percent."
In the wild trading session that followed Pulte's earnings report on Tuesday, shares of the homebuilder hit a new 52-week low before reversing course and rallying more than 7 percent.
"I think its ability to rally tells you that this bedraggled cohort may finally be finding a bottom," Cramer said. "The fact that buyers can see value in this hideous group was the single most bullish development in a pretty darned bullish turnaround of a session."
Pulte's earnings report shed light on the Fed's effect on housing, he said. The construction giant's earnings boost came mostly from active adult housing, business speak for senior living. Meanwhile, the rest of the business was squeezed as people resisted selling homes with lower mortgage rates only to enter a market with much higher rates.
"If you look at what led this market down, it was housing and the housing stocks. The Fed's lockstep rate hikes pretty much stopped this industry in its tracks, as higher rates make homes less affordable," Cramer explained. "With mortgage rates at 5 percent, homes are now unaffordable for large swaths of the country."
Now, there are only two ways to get the real estate market back on its feet, the "Mad Money" host said.
"First, mortgage rates have to come down," Cramer said. "That's not gonna happen anytime soon — the Fed's determined to slam the brakes on housing. ... It's funny, the Fed has already succeeded beyond its wildest dreams. They just refuse to acknowledge it."
Second, home sellers need to start cutting prices and offering incentives, "another win for the Fed," Cramer said.
"Of course, because there's a shortage of land in many areas, you don't see the kind of supply-demand imbalance that would cause a genuine housing crash like we had in 2008," he added. "But if the Fed tightens four more times as they've told us they will do, ... well, let's just say it's going to be real bad for homeowners."
And even after its rally on Tuesday, Pulte's stock has still lost over 32 percent in 2018. Cramer chalked it up to a "relief rally" that helped the housing sector's prospects, but didn't completely change the outlook.
"The ultimate takeaway here is that the first group to roll over in this whole market was the homebuilders, and they've finally gotten so beaten up that a 1-percent gain in orders is enough to satiate the sellers and to suddenly bring in buyers," he said. "I wouldn't buy the homebuilders here — housing prices still need to go lower nationwide and that will take months — but it's a very encouraging sign that Pulte was able to rally."