Home Builder Outlook Drops Over Jobs, Foreclosures

US home builder sentiment unexpectedly fell in January to the lowest level since June on concerns over the weak labor market and high foreclosure volume, according to a survey on Tuesday that pointed to a patchy recovery in the housing sector.

Home Construction
Lee Coursey
Home Construction

The National Association of Home Builders/Wells Fargo Housing Market Index for January slipped to 15 from 16 in December, below market expectations for a reading of 17.

The survey blamed the setback in sentiment on the weak labor market, which has produced the highest unemployment rate in 26 years.

A reading below 50 indicates more builders view sales conditions as poor than good.

“Home buying conditions have rarely been as good as they are right now, but consumers are still waiting to see significant positive signs of improvement in employment and confidence, and this is slowing buyers’ return to the market,” said NAHB Chief Economist David Crowe in a statement.

“Meanwhile, competition from foreclosed homes is also severely impacting new-home sales. That said, expected improvement in the job market this spring will help propel the housing recovery as we head into the prime home buying season," Crowe said.

The drop in home builder sentiment follows data earlier this month from the National Association of Realtors showing previously-owned U.S. homes under contract to be sold fell more sharply than expected in November. Analysts said the pending home sales fell because buyers had been acting to beat the original expiration of an $8,000 tax credit for first-time buyers.

Housing, the main force behind the worst US recession in seven decades, is slowly healing after a three-year slump. The homebuilder sentiment index is up sharply from the 8 reading in January 2009.

"Builders also realize that factors beyond our control— including consumer concerns about job security and competition from foreclosed homes on the market—are still impeding demand for new homes at this time," said Joe Robson, chairman of the NAHB.

The NAHB survey showed the current sales conditions gauge for single-family home sales dipped one point to 15 this month.

The sales expectations measure for the next six months remained steady at 26. The traffic of prospective buyers index fell one point to 12 after remaining at 13 for three straight months.

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