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Tom Lee: Housing stocks set to double—here's why

Tom Lee's bullish case for housing

The news that housing starts rose 20 percent in April serves as just the latest evidence that housing is set to roar back in a big way, according to Fundstrat Global Advisors' Tom Lee. But the real key to the rally will be young people buying homes.

Lee notes that household formation numbers compiled by the U.S. Census have recently started to break out. But the usually bullish strategist says they still have a long way to go.

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Based on unusually low household formation numbers, "there's a ton of people living in basements," Lee said Tuesday in an interview with CNBC's "Trading Nation." "Two quarters of pretty decent household formation isn't getting everybody out of the basement. I think this means we have multiple years where household formations are well over 1.3 million, 1.4 million."

Of course, if many more young people start buying homes, that's a natural boon to the companies building them.

"I think housing and housing-related stocks are all buys," Lee said. "If housing starts go to 2 million, which is where we think they're going to go, the builders are going to rise almost 150 percent from here."

And this all has very positive ramifications for the broader economy and market.

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"I think it's a very bullish sign because when you look at housing cycles... there's so much revenue and activity generated by housing that if starts go to 2 million, it's several hundred billion dollars of incremental revenues for that sector."

Lee isn't the only bull crowing about the housing market these days.

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Canaccord Genuity equity strategist Tony Dwyer made a similar point Tuesday in a note to clients, writing that the "acceleration in the number of millennials turning 30 over the next six years ... could ramp household formations," particularly given the "positive employment outlook" and "low household debt service ratio."

If young people develop a taste for houses, then, the outlook for homebuilders could begin to look very bright indeed.

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