Jim Cramer: The Dichotomy in Housing

NEW YORK ( Real Money) -- The dichotomy between the housing stocks and the stocks of companies that make goods that go into new homes is about as stark as I can remember. And the disparity is growing.

You take high-quality home-related stocks such as Masco ( MAS), up 25%; Home Depot ( HD), up 24%; and Lowe's ( LOW), up 38% for the year, and you compare them with homebuilders such as Pulte ( PHM), down 3%; Toll Brothers ( TOL), flat; Lennar ( LEN), down 9%; and DR Horton ( DHI), off 6%, and you might as well be talking about two, totally unrelated industries.

That's because they are two different industries. One's related to confidence, credit, cost of building homes and interest rates, and the other is just about pent-up demand to spend on a house you already own, knowing that your house is done going down in value.

I think that the confusion over these two parts of the housing story is what has kept a lot of people out of Whirlpool ( WHR), up 44%, or Masco or Fortune Brands ( FBHS), up 45%. Investors just don't believe that they aren't a tandem, that they aren't handcuffed.

It's still one more example of a changed market that people don't understand has occurred. The housing stocks haven't done much at all year. They didn't do much ahead of the interest-rate spike and they haven't done much since. I think that's because they are still expensive relative to earnings. They ran up so much going into the year that they will have to stay put and the fall will have to be a good selling season if they are even going to maintain their current price levels. I don't think it will turn out to be so because of the sequester, debt-ceiling and budget shutdown debacles.

But the housing-related stocks were standouts coming in to the year and then got hammered only with the sudden rate increase. Ever since, then they have slowly but surely come back as the 10-year drifted below the 2.5% level. I think these stocks are now, to a degree, vulnerable again if rates tick up to 2.75% -- as they appeared to be during the end of last week's session -- but that they are benefitting from a consumer that has a predilection for hard goods over soft goods. I don't see that changing anytime soon.

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