When you think about the US housing market, it’s useful to start with this simple proposition: There aren’t enough used homes for sale.

That’s in part a function of financing costs, which are higher than mortgage rates on a lot of existing properties. In short, many homeowners are effectively locked in their homes. Would-be buyers can’t purchase what isn’t for sale, and the scarcity premium for what resale inventory is available means that in many cases, they can’t purchase what is for sale either.

There’s an opportunity there for builders, and particularly for large, publicly-traded builders with margin to spare such that they can dangle incentives in front of anxious buyers desperate to realize the American homeownership dream. Simply put: Families are being herded into new construction because that’s all there is for sale. According to the NAHB, around a third of listed homes last month were new homes, either completed or under construction. That figure was less than 13% on average in the two decades leading up to the pandemic.

This situation is sub-optimal for any number of reasons, but a glass half-full take might be that voracious demand for new homes is just the thing to revive residential investment, which was a drag on GDP growth for a seventh consecutive quarter in Q1.

That’s the context for a fairly dramatic jump in housing starts, which rose nearly 22% in May to a 1.63 million annual rate, according to figures released on Tuesday.

To call the headline print a beat would be to materially understate the case. The highest estimate from five-dozen people who plainly have no idea what they’re talking about called for a 1.46 million pace.

Single-family starts jumped 19% and damn near made it back to the one million SAAR mark for the first time since June of last year, when prices peaked. Multi-family starts rose more than 27%. Permits topped estimates too.

Small wonder homebuilder sentiment has rebounded to 11-month highs alongside a record-setting rally in homebuilder stocks which continued on Tuesday.

Thanks to the blockbuster read on new construction, the S&P Composite 1500 Homebuilding Index rose a third session to a new high. The gauge is up 42% in 2023. Who needs A.I. when you’ve got hammers?

Pretty much anything to do with homes was higher. The usual suspects were all up (Toll, Lennar and so on), and downtrodden digital play Opendoor jumped 15% at one point before trimming gains. (Any rebound is small comfort. The shares crashed 97% from peak to trough.)

Again, a sunny take says more construction will mitigate the supply-demand mismatch, helping to bring down prices, while all the building will bolster the economy at a time when consumption might be waning and business spending is expected to slow.

The problem, though, is that hot housing and cool inflation, to the extent they can coexist at all, would make for strange bedfellows.