April Housing Data Obliterates Expectations; Investors Buy In

April housing data is out, and it obliterated consensus estimates.

U.S. Housing Starts came in at 1.14 million versus the 1.01 million estimate -- a 20.2 percent month-over-month growth. Economists had expected single-digit growth.

Building permits also grew 10.1 percent over the month, nearly 8 percentage points higher than estimates. For context, building permit filings shrank 5.4 percent between February and March.

What's Moving?

As expected, investors became positive on homebuilders almost immediately after this data became public. KB Home KBH and Hovnanian Enterprises, Inc. HOV shares are up 1.9 percent pre-market session, while Lennar Corporation LEN has risen nearly 1 percent.

Related Link: Raymond James' Mass Downgrade Of Homebuilders Shows...It Doesn't Like Them Very Much

PulteGroup, Inc. PHM stock has also responded.

The SPDR S&P Homebuilders (ETF) XHB will be worth watching during the rest of the trading day.

Top Picks

On Wall Street, MKM Partners recently talked about its favorite homebuilder stocks. Beazer Homes USA, Inc. BZH, KB Home and M.D.C. Holdings, Inc. MDC were listed as three of the cheapest plays from a price-to-book standpoint.

MKM holds a Buy rating on KB Home with a $20 price target; it also rates Toll Brothers Inc TOL as a Buy with a $44 price target.

MKM analyst Megan McGrath said interested investors should be "patient and selective."