Longview

What: Shares of home builder Hovnanian Enterprises (NYSE:HOV) surged on Tuesday following a report that U.S. housing starts rose to an eight-year high during the month of July. At noon Tuesday, the stock was up about 16%.

So what: Hovnanian stock has been slumping for the past couple of years, and the company's latest earnings report badly missed analyst estimates. The company's performance is tied to the strength of the U.S housing market, and news of a strong July bodes well for Hovnanian.

Groundbreaking for single-family homes rose 12.8% in July to a 782,000 unit rate. Overall, privately owned housing starts in July were at a seasonally adjusted rate of 1.206 million, slightly above the revised June figure and 10.1% higher year over year. This marks four months in a row that housing starts have been above a 1 million-unit pace.

Now what: Shares of Hovnanian are still down more than 60% so far this year, even after the jump today. The company posted a net loss in each of the past two quarters despite the strengthening housing market, but analysts are expecting the company to return to profitability in the fourth quarter. These strong housing numbers should help the cause.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.