Best to take wait-and-see approach to homebuilder stocks, says Jim Cramer

Core Viewpoint - The recent performance of major home builders, particularly Lenar and KB Home, indicates that despite expectations of improved market conditions due to anticipated rate cuts from the Federal Reserve, actual sales and financial results have not met investor hopes, leading to a cautious outlook for the housing market. Group 1: Lenar's Performance - Lenar reported weaker than expected revenue and lower deliveries, with average selling prices only meeting expectations, resulting in a housing gross margin of 17.5%, which is 30 basis points lower than anticipated and 500 basis points lower than the previous year [3][4] - The company acknowledged continued softening of market conditions and affordability, with third quarter results reflecting these challenges [2][3] - Lenar's management indicated that while they delivered more units than expected, it required additional incentives that negatively impacted gross margins, and they expect current quarter earnings to fall below expectations [4][5] Group 2: KB Home's Performance - KB Home reported better than expected sales and average selling prices, but both metrics were still down year-over-year, and the company cut its full-year sales forecast significantly [11][12] - Management expressed a favorable long-term outlook for housing driven by demographics and a shortage of homes, but noted that short-term demand has not significantly increased despite lower mortgage rates [13][17] - The decline in mortgage rates has added approximately $30,000 of purchasing power for customers based on KB Home's average selling price, which is particularly beneficial for first-time home buyers [14][15] Group 3: Market Outlook - Both Lenar and KB Home emphasized the need for lower mortgage rates to stimulate sales, with management from both companies sounding optimistic about the potential for rates to decrease further [20] - Despite the Fed's recent rate cuts, long-term interest rates have been rising, raising concerns about a repeat of last year's market conditions where rate cuts did not lead to improved sales [10][20] - The overall sentiment from both companies suggests that while there are early signs of increased customer interest, a significant uptick in sales has yet to materialize, leading to a cautious approach in the housing market [6][19]