Homebuilder outlook dips despite tax credit

Even a holiday gift from Uncle Sam couldn't brighten the homebuilders' outlook in December.

The National Association of Home Builders said Tuesday its housing market index fell by one point to 16 this month, reflecting concern that job losses and a slow economic recovery will continue to stifle demand for new homes despite the extension of a federal tax credit for buyers.

The latest reading is the lowest since June, when it fell to 15. This was also the first monthly decline since October.

The worsening outlook was something of a surprise because it came one month after the industry received a major boost from Congress and the Obama administration.

New home sales got a lift this year from low mortgage interest rates and an $8,000 federal tax credit for first-time homebuyers. The incentive was set to expire on Nov. 30, but Congress extended it through April and expanded it to include $6,500 for existing homeowners.

"This is shaping up to be a bumpy recovery period for the housing market," said David Crowe, the NAHB's chief economist. "While some families may be just starting to factor the expanded tax credit into their potential home buying plans, many are hesitating because of the poor economy."

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Unemployment dropped slightly in November to 10 percent, from a 26-year high of 10.2 percent. But many analysts expect the rate will continue to climb in coming months.

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In the latest survey of builder confidence, the reading for current sales conditions slipped one point to 16. Traffic by prospective buyers stood at 13. And builders' outlook for sales over the next six months fell by two points to 26.

The index reflects a survey of 514 residential developers nationwide. Index readings below 50 indicate negative sentiment about the market. The last time it was above 50 was in April 2006.