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Homebuilders Remain Confident

Despite some signs that the housing market may be slowing down modestly from its blistering rate of growth earlier during the year, home builders remained bullish during the final days of 2004, their confidence level virtually unchanged over the past three months, according to a monthly canvass by the national Association of Home Builders and Wells Fargo Bank.

The monthly Housing Market Index for December edged up to a reading of 71, indicating that builder confidence remained strong and steady during the fourth quarter of the year. “On a nationwide basis, the final quarter of 2004 has been a good one for home builders,” said David Seiders, chief economist of the builders' trade association.

“Indeed, the average HIM was up several points for the quarter, reflecting excellent financing conditions, rising home prices and an improved economy.”

Each month, builders report current sales of single-family homes and prospects for sales in the next six months.

They also rate traffic of prospective buyers. During December, the index component gauging single-family sales remained unchanged at 77, while the component gauging expected sales in the next six months rose one point to a reading of 79. The component gauging traffic of prospective buyers also rose one point to a December level of 52.

Breaking results out by region, builders in Western states were most bullish, with a reading of 80.1, followed by their counterparts in the South at 76.1; the Northeast at 71.9; and the Midwest, at 56.7.

“The Midwest's relatively weak showing presumably reflects builder perceptions of the area's relatively weak job market, which has lost one million jobs since mid-2000 and only started picking up again in the last two quarters,” said Seiders. “However, the impact of job losses on the housing market has been softened by historically low mortgage rates.”

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