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Homebuilders Remained Confident in January on Rising U.S. Sales

Jan. 16 (Bloomberg) -- Confidence among U.S. homebuilders held in January near its highest level in eight years, indicating the residential real-estate market will continue to contribute to economic growth in 2014.

While the National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 56 from 57 in December, readings greater than 50 mean more respondents report good market conditions, figures from the Washington-based group showed today. The median forecast in a Bloomberg survey called for 58.

Home construction has been a source of strength for the economic expansion, propelled by job gains and rising property values. The market has weathered an increase in interest rates and prices are forecast to continue rising this year.

“Many markets continue to improve and this bodes well for future home sales,” NAHB Chairman Rick Judson, a home builder from Charlotte, North Carolina, said in a statement.

Estimates in a Bloomberg survey of 52 economists ranged from 55 to 60. The December reading was revised down from a prior estimate of 58, a level reached in August that was the highest since November 2005.

The group’s measure of the six-month sales outlook declined to 60 from 62. A gauge of prospective buyer traffic decreased to 40 from 43 last month. The index of current single-family home sales fell to 62 from an eight-year high of 63 in December.

Builder confidence fell in two of four regions, led by a seven-point drop in the South. The index also fell in the Midwest and rose in the Northeast and West.

Borrowing Costs

Borrowing costs for homebuyers, which have been climbing since May, were largely unchanged for the week ended Jan. 9, with the average 30-year, fixed-rate mortgage at 4.51 percent, down from 4.53 percent the week before. A year ago, the average rate was 3.4 percent, according to Freddie Mac in McLean, Virginia.

A strengthening housing market and low interest rates have boosted builders, suppliers and lenders, including Wells Fargo & Co. The outlook remains positive even with a plunge in mortgage refinancing and slowing growth in home values, Wells Fargo Chairman and Chief Executive Officer John Stumpf said.

“While we don’t expect the same rate of home price appreciation we had last year, we do expect the housing market to continue to recover, which will benefit the U.S. economy,” Stumpf said on a Jan. 14 earnings call. “And despite the rise in home prices, and interest rates over the past year, housing is still very affordable.”

A report tomorrow is projected to show housing starts dropped to a 990,000 annualized pace in December after surging to a more than five-year high of 1.09 million the prior month, according to the median forecast of economists surveyed before figures from the Commerce Department. It would still mark the best back-to-back months since 2008.

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