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Today, the National Association of Homebuilders released its latest Housing Market Index (HMI), showing continued improvement in December with the composite HMI index rising to 47 while the "buyer traffic" index improved to 36, a level not seen since early 2006. While all indicators have made truly spectacular improvements this year, it's important to note that conditions still remain fairly distressed by historic standards.

Although, looking at the data, it is fairly clear that the last few months of results indicate a major change in builder sentiment. That is likely a result of improvements in confidence given the notable rise in buyer traffic, reduced inventory, and a more balanced monthly supply.

Source: Homebuilder Blues: NAHB/Wells Fargo Homebuilder Ratings: December 2012