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Sector Snap: Moody's lifts outlook on homebuilders

NEW YORK (AP) -- As the U.S. housing market slowly recovers, Moody's says that it is more upbeat on the companies that build and sell new homes.

The ratings agency on Thursday lifted its outlook on homebuilders to positive from stable, predicting that sales volumes will increase over the next year and home prices will stabilize. Low interest rates, affordable prices and consumers' pent-up demand for houses will help bolster the companies, Moody's said.

Homebuilders are a bellwether for the health of the overall housing market and the economy. While new homes represent less than one-fifth of the total housing market, their construction has a major effect on the economy.

The U.S. housing market appears to be recovering slowly, five years after the housing bubble burst. Sales of new homes are running ahead of last year, when they sank to the lowest level in a half-century. Still, they are below healthy levels.

Mortgage rates remain near record lows, beckoning potential buyers with good credit. But many people are having difficulty qualifying for home loans or can't afford larger down payments required by banks.

Home prices are increasing more consistently this year, in part because the supply of homes has shrunk while sales have risen.

The recovery may still get bumpier. Moody's warned that a new wave of foreclosures could hold back home sales, while the weakening economy in Europe and the possible inability for U.S. politicians to reach a budget deal could damage the U.S. economy. That could keep consumers from taking out big loans for homes.

Shares of major homebuilders have been on a tear this year, but traded mixed Thursday afternoon.

— PulteGroup Inc.'s stock rose 27 cents to $15.82. Its stock has more than doubled its value for the year to date.

— Toll Brothers Inc. climbed 11 cents to $35.05. It's gained 68 percent in 2012.

— KB Home increased 12 cents to $12.89. It's gained 84 percent in 2012.

— Lennar Corp. added 17 cents to $34.69. It's gained 72 percent in 2012.

— D.R. Horton Inc. gained 18 cents to $20.75. It's gained 60 percent in 2012.

— Meritage Homes Corp.'s stock dropped 20 cents to $39.22. It's gained 65 percent in 2012.