What to watch

Housing starts offer insight into real estate foundation

Housing, a sore spot during the Great Recession and post-financial crisis period, is now a beacon of hope. The real estate recovery, while choppy, arguably has been a bright spot, thanks to a drop in the unemployment rate to 5.1%, still-low interest rates and higher prices.

Monday, an index measuring home-builder confidence levels in October not only topped Wall Street estimates, but also hit a post-recession high.

Now investors are hoping the renewed confidence on behalf of builders and developers could be due to builders breaking ground on more houses than forecast in September. The housing starts number is set for release at 8:30 a.m. ET Tuesday.

And Wall Street is expecting starts to tick up to an annualized pace of 1.145 million units, up from 1.126 million in August, according to UBS.

Wall Street will be watching closely to see if the new activity is picking up in single-family homes instead of multifamily units, a trend that is just starting to show its green-shoots. Any signs that builders are starting to focus more of their efforts on singlefamily dwellings could signal another thaw in the housing market, which is still trying to put the challenging times of the last real estate bust behind it.

Construction of more singlefamily homes is a bullish development, as it suggests more homebuyers have the financial means to finance a purchase on their own and signals a shift away from building multiunit rental units.