By April Joyner

NEW YORK (Reuters) - The pace of U.S. economic growth may prove to be critical for shares of homebuilders, which have climbed sharply as spring approaches. An easing economy that allows for lower interest rates supports an optimistic outlook for the industry, investors say, but any hints of a sustained downturn could sink shares.

So far this year, the PHLX Housing Index has jumped 16.3 percent, versus a 9 percent advance for the benchmark S&P 500.

Housing shares tend to rise from late fall to early spring, in anticipation of the busiest selling season of the year for homebuilders. Since 2002, the PHLX Housing Index has averaged a 7.1 percent rise between the end of October and the end of April, versus a 3.8 percent drop outside of that period.

This year's run-up is pronounced given the sharp tumble U.S. stocks took in the fourth quarter of 2018. The PHLX Housing Index fell 15.7 percent, even more than the S&P 500's 14 percent decline. The seasonal trend in homebuilding shares has been resilient even in the face of dismal data that showed U.S. housing starts dropped to their lowest level in two years.

Yet a survey from the National Association of Home Builders showed that homebuilder confidence increased in February, and the latest housing starts data released by the Commerce Department on Friday showed that homebuilding increased more than expected in January.

Along with a positive outlook for the U.S. economy as a whole, those data support a sustained climb in homebuilding shares, some investors say.

"The risk-reward ratio for housing still looks good, as long as employment and household formation remain strong," said Eric Marshall, portfolio manager at Hodges Capital in Dallas.

Elevated home prices have been one of the biggest hurdles for the industry, both investors and analysts say. Rising mortgage rates, which climbed past 5 percent last fall, exacerbated concerns about affordability.

But mortgage rates have since eased in tandem with Treasury yields as the Federal Reserve has indicated it will pause interest-rate hikes and inflation has remained benign. U.S. 30-year mortgage rates are tied to the benchmark 10-year Treasury yield.

"We have had a revival in housing because rates have declined," said Gary Shilling, president of the investment research firm A. Gary Shilling & Co. in Springfield, New Jersey.

Home prices have also moderated, with the S&P/Case-Shiller index showing prices increasing in December by the smallest percentage since November 2014.

The 2017 U.S. federal tax overhaul capped deductions for state and local taxes, which raised concerns that people would be dissuaded from buying homes in high-tax states such as New York and California. But a slowdown in those markets may be offset by an uptick in other regional markets.