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Homebuilders saw big gains during 2012

– Improving home sales and expectations for a gradual but sustained housing recovery propelled shares of homebuilders to their highest prices in years in 2012 following a long slump.

Shares in the 13 publicly traded U.S. builders remained well off their peak prices from 2005, during the housing boom, but they were up an average of more than twofold for the year. By comparison, the S&P 500 was up 12 percent in the same period.

Investors have been piling back into homebuilder stocks, as sales of new homes have begun to rebound after sinking to historic lows in 2011.

New-home sales were up 15.3 percent over 2011, hitting a seasonally adjusted annual rate of 377,000 in November. And the pace of home construction is nearly 22 percent higher than a year ago, with builders on track to start work on the most homes in four years.

Homebuilders are also feeling more confident about the future. The National Association of Home Builders/Wells Fargo survey, which gauges builder confidence, climbed in December to its highest level in 6 1/2 years. That signals builders are more optimistic that the housing recovery will endure.

Sales trends have been buoyed by stable job gains and record-low mortgage rates. More people are looking to buy or rent a home after living with relatives or friends during and immediately after the recession.

In addition, the excess supply of homes that were built during the housing boom has finally thinned out.

Only 149,000 new homes were for sale at the end of November. That’s just above a record low of 143,000 in August.

And foreclosures, which can be a drag on the value of nearby homes, have slowed last year. That, plus a thinner slate of homes for sale in many markets, has helped drive home prices higher.

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