TheStreet.com TV Recap: How to Play the Builders Now

"The index is going to get inflated again because technically it held," Cramer explained. "It's the technicals that are ruling. I want very much to bang that index after a rally."

Moving on to KBH, Cramer said that after looking at the company's balance sheet on Thursday, KBH is good and will make it. "They're good to 2014," he said. "That is absolutely enough time to turn around the operation."

Although it has way too much land and a bad debt-to-equity level, the homebuilder's balance sheet has "dramatically" improved, and it has more than $1 billion in cash, Cramer said.

"A way to play the HGX is to go buy calls or common KBH because it's now out of the woods, and short the index," he said. "That's a trade I would endorse both sides of."

"Real estate can turn," Cramer said. "I'm not saying real estate can't turn. It's just that yesterday we had the Freddie Mac (FRE Quote) CEO, Fannie Mae (FNM Quote) CEO and the KBH CEO saying that 2008 is now a write-off. That's far more bearish than I've been."