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Sector Snap: Construction data boosts housing

WASHINGTON (AP) -- Homebuilder and construction materials stocks soared Thursday after the government said that U.S. builders started work on homes in December at the fastest pace in 4 ½ years.

Last year was the best year for residential construction since the early stages of the housing crisis, the Commerce Department said. It said last month's seasonally adjusted annual rate of housing starts was 954,000, 12.1 percent higher than November's rate and nearly double the recession low reached in April 2009.

The numbers were strong across both single-family homes and apartments. The pace at which builders requested permits to start new homes, a signal of future housing activity, also reached a 4 ½ year high.

Confidence among homebuilders held steady in January at the highest level in nearly seven years. But builders are feeling slightly less optimistic about their prospects for sales over the next six months, according to a survey released Wednesday.

Analysts at KeyBanc Capital Markets said the data reinforced their positive view of homebuilders and makers of building products.

"Our positive call on the builders assumes earnings upside will come as volume recovers, amplified by higher home prices, which historically track rising housing activity," they wrote in a research note published Thursday.

The analysts' top picks among homebuilders are Lennar Corp. and Toll Brothers Inc. They also have "Buy" ratings on The Ryland Group Inc. and PulteGroup Inc.

PulteGroup rose $1.00, or 5.2 percent, to $20.34 as of 3:11 p.m. Eastern time Thursday.

Toll Brothers rose $1.11, or 3.2 percent, to $36.02.

Ryland added 73 cents, or 1.9 percent, to $39.04.

Lennar gained $1.29, or 3.2 percent, to $41.81.

Among construction supply companies whose products are needed to build new homes, Armstrong World Industries Inc. rose $1.81, or 3.4 percent, to $54.75.

Beacon Roofing rose 63 cents, or 1.8 percent, to $34.81.

Pool Corp. rose 47 cents, or 1.1 percent, to $44.92.

Gibraltar Industries Inc. gained 78 cents, to 4.9 percent, to $16.81.

Mohawk Industries Inc. rose $3.16, or 3.4 percent, to $96.76.