Market Excited Over Housing Recovery

Builders Warn on Housing
Tim Boyle | Bloomberg | Getty Images

Starting to get excited about the housing recovery. And so is the Street: homebuilders up 4 to 6 percent Tuesday, leading the market.

(Read more: Yes, Housing Starts Surge, But Rentals Are the Drivers)

Today's October Housing Starts, at 894,000, were the best since July 2008. Critics note the gains last month were all in multifamily. Regardless, any kind of building is welcome at this point.

Housing Starts are up 42 percent year-over-year; single family starts are up 35 percent.

(Read more: The Housing Recovery Is Getting Real)

There's other signs that the housing recovery is real:

1) Existing Home Sales for October, out yesterday, were up 2.1 percent from September and 11 percent year-over-year

2) the NAHB Builder Survey for November was at 46, the highest since May, 2006 and well above expectations of 41

3) builder DR Horton said last week that order trends were strong.

(Read more: IRS Holds the Key to 'Fiscal Cliff' Rally)

Here are the trends I see:

1) the number of houses for sale are decreasing;

2) Household formations are increasing;

3) House prices are increasing, partly because the percentage of buyers to the number of houses for sale is increasing.

What's needed: an even stronger recovery in sales, which are still being held back by tight mortgage lending standards.

Homebuilding and Hurricane Sandy. Been asked about the influence of Sandy on starts. Nothing in October, and what effect there is will be fairly small because it will be spread out over a long time:

1) it takes cities some time to approve permits

2) Insurance collection takes time

—By CNBC's Bob Pisani

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