US housing starts rose to 1.322 million in November, up from 1.246 million in the previous month.
This is a month-on-month increase in the annualised pace of new home construction.
Housing Starts Signal Resilience
From today’s date (February 18, 2026), the strong housing starts figure from November 2025 was an early sign that the economy was holding up well. It suggested the housing market had more momentum going into winter than many forecasts expected. That strength has remained an important theme in our view for the first quarter of this year.
Newer data supports this story. For example, the January 2026 Consumer Price Index came in hotter than expected at 3.1%. Because of this, markets have quickly reduced expectations for Federal Reserve rate cuts. The chance of a cut by June has dropped from over 70% at the start of the year to just under 40% today.
In the near term, we are positioning for a “higher for longer” rate backdrop. That could mean considering short positions in interest rate futures, since we expect yields to stay elevated. Another potential hedge is buying puts on Treasury bond ETFs, as protection if the Fed keeps policy tight through spring.
For housing, steady demand suggests homebuilders may be able to handle higher borrowing costs. We are watching the idea of selling out-of-the-money puts on homebuilder ETFs. The thesis is that recent strength has created a solid support level.
We saw something similar in 2023. Builder stocks rose even as mortgage rates climbed, largely because there were not enough existing homes for sale.
Positioning For Rate Driven Volatility
This push and pull—an economy that stays firm, and a Fed that stays hawkish—adds uncertainty. We think that can lift volatility. One approach we are considering is buying short-dated call options on the VIX ahead of the March FOMC meeting. This can be a lower-cost way to help protect against a sharp market move after the Fed releases updated projections.
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