Strong U.S. housing starts data and rising house prices bode well for stocks in the home building sector, an industry analyst said Tuesday.
Housing starts surged 20.2 percent to a seasonally adjusted annual pace of 1.14 million units, the highest since November 2007, the Commerce Department said Tuesday. The data come as home prices grew more than 6 percent for the third straight month in April, according to brokerage Redfin.
"This is the most bullish we've been on the housing market since 2007," said Bob Wetenhall, a home builder analyst at RBC Capital Markets, in an interview on CNBC's "Power Lunch."
RBC believes companies that make building products, including Mohawk Industries and Masco, will benefit from the current environment, which Wetenhall called "red-hot." Mohawk and Masco shares have climbed more than 21 and 10 percent this year, respectively.
But U.S. housing data may not be flashing entirely optimistic signs. Home builder confidence slipped in May, according to a monthly survey from the National Association of Home Builders.
Sales of newly built homes fell more than 11 percent in March, according to the U.S. Census. Mortgage applications to purchase a home were flat in April, the Mortgage Bankers Association said Friday.
However, Tuesday's numbers are "still a step forward," said David Crowe, chief economist at the NAHB. Spring momentum has started to make up for a "lousy winter," he said Tuesday on "Power Lunch."
He noted that the multifamily-home space seems stronger than single family.
—CNBC's Diana Olick contributed to this report.