The housing market appears to have regained its momentumin 2018 with new home construction rising to the highest level since October 2016 and building permits at 10½-year high in January.

U.S. housing starts climbed 9.9% to a seasonally adjusted annual rate of 1.326 million homes. This represents the second highest level since the recession, following the financial crisis and easily exceeded the 1.24 million forecast by economists polled by MarketWatch. New construction was driven by a solid rebound in single-family houses, which rose 3.7%, and a surge in apartments and condominiums, which shot up 19.7% – the biggest increase since December 2016.

Meanwhile, new applications for building permits, a construction bellwether for the coming months, rose 7.4% to an annual rate of 1.396 million – the highest level since June 2007.

The data released early last week also showed that builders are optimistic about the outlook for housing. This is especially true as homebuilder confidence last monthhovered near the highest level since 1999 as indicated by the National Association of Home Builders/Wells Fargo sentiment index. Additionally, the gauge of future sales expectations has reached a post-recession high, suggesting that the demand for homes will remain strong in the months ahead.

The upbeat data has spread optimism in the homebuilding space, propelling stocks higher. Hovnanian Enterprises , NVR Inc. (NVR – Free Report) and Beazer Homes (BZH – Free Report) stole the show, gaining 5.7%, 4.3% and 3.6%, respectively. The homebuilder ETFs space also witnessed encouraging trading, with iShares U.S. Home Construction ETF (ITB – Free Report) , SPDR S&P Homebuilders ETF (XHB – Free Report) and PowerShares Dynamic Building & Construction Fund (PKB – Free Report) rising 1.3%, 0.5% and 0.8%, respectively on the day.

What Lies Ahead?

This seems to reverse the bearish trend seen in the space so far this year. Investors lost interest in these ETFs as ITB shed $541.2 million in capital, followed by outflows of $223.2 million for XHB and $10.9 million for PKB, per etf.com. The trio is down 5.6%, 3% and 4.9%, respectively on a year-to-datebasis.