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Home builder confidence drops

All regions saw a drop in builder sentiment, led by the West. Above, work in Sunnyvale, Calif. All regions saw a drop in builder sentiment, led by the West. Above, work in Sunnyvale, Calif. (Paul Sakuma/Associated Press)
By Bob Willis
Bloomberg News / January 20, 2010

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WASHINGTON - Confidence among US home builders unexpectedly dropped this month to the lowest level since June, a sign the housing recovery might stall in coming months.

The National Association of Home Builders/Wells Fargo index of builder confidence decreased from 16 to 15 last month, the Washington-based group said yesterday. Readings below 50 mean most respondents view conditions as poor.

The report showed traffic slowed to a 10-month low, indicating the government’s extension and expansion of its first-time buyer program so far has not drawn new demand. A projected record 3 million foreclosures this year could also pressure prices, making it more difficult for homebuilders to turn a profit.

“Builders are still competing against the flood of foreclosures coming back to the market,’’ Russell Price, a senior economist at Ameriprise Financial in Detroit, said before the report.

The builder confidence index was forecast to increase to 17 this month, according to the median forecast of 45 economists. Projections ranged from 14 to 18. The index averaged 15 last year.

The builders index of single-family home sales fell from 16 in December to 15 in January.

The gauge of buyer traffic dropped from 13 to 12, the lowest level since March. A measure of sales expectations for the next six months held at 26.

“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, the group’s chairman and a builder from Tulsa.

All four regions showed a drop in sentiment, led by the West, which fell from 19 to 16. In the Northeast, confidence decreased from 23 to 22, in the Midwest it fell from 12 to 11 and from 17 to 16 in the South.

The confidence survey asks builders to characterize sales as “good,’’ “fair,’’ or “poor,’’ and to gauge prospective buyers’ traffic. It asks participants to gauge the outlook for the next six months.