CNBC's Jim Cramer on Friday recommended investors treat any near-term pullback in the homebuilding stocks as a buying opportunity.
Citing a recent research note from Zelman & Associates, the "Mad Money" host believes there is more upside in the sector, pointing to the stocks of D.R. Horton, Lennar, Toll Brothers and Taylor Morrison.
"Ivy Zelman and her team at Zelman & Associates knocked it out of the park when they called for a housing rally back in March," he said, "and now that the homebuilders have pulled back from their highs, I think you're getting a chance to pounce again."
Taylor Morrison shares are nearly $3 off their 2019 peak. Lennar is $1 under, while the equities of D.R. Horton and Toll Brothers are within $1 of their highs, according to FactSet.
The SPDR S&P Homebuilders ETF, which tracks the homebuilders segment, has risen more than 20% since March. The fund has rallied nearly 43% since the start of the year, setting a closing high in Friday's session of $46.07. TopBuild, Installed Building Products and Skyline Champion have been the biggest gainers in the ETF, more than doubling in value over that 10-month period.
Zelman's prediction in March was a "major contrarian call" and turned out to be right, Cramer added. Her thesis was helped by lower interest rates, which boosted mortgage demand, and a slowing global economy, which put pressure on commodity costs in steel, aluminum and lumber that made building a home cheaper, he said.
The benchmark 10-year U.S. Treasury yielded about 1.72% as of Friday, down from about 3.14% a year ago. U.S. housing starts reached a 12-year high in August, growing 12.3% to a seasonally adjusted annual rate of 1.364 million units.
"The homebuilders have caught fire this year," Cramer said. "Especially over the last couple of months they've been red hot, and today's terrific jobs report certainly doesn't hurt."
"Sure enough, in the past few weeks there's been some profit-taking in the homebuilders, and I think you need to treat this as a buying opportunity," he added.