WASHINGTON ( TheStreet) -- The National Association of Home Builders' index of builder sentiment came in flat month-over-month for the third consecutive month as interest among potential buyers remained sluggish.

The NAHB said early Tuesday its confidence index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, came in flat at a reading of 16 in January, matching expectations according to consensus estimates listed on Briefing.com.
Construction

Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006.

The index's components include current sales conditions, sales expectations and traffic of prospective buyers. The first two components were unchanged in January at readings of 16 and 25, respectively, while traffic of prospective buyers edged up a single point to 12.

"As we emerge from the traditionally slow holiday season, builders continue to look for signs of improvement in the economy, home buyer demand and builder and consumer credit conditions," said 2011 NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "Unfortunately, a severe lack of construction financing, and widespread difficulties in obtaining accurate appraisal values, continue to limit builders' ability to prepare for anticipated improvements in buyer demand in 2011."

"The HMI and its subcomponent indexes are holding steady following a below-expectations finish in 2010," noted NAHB Chief Economist David Crowe. "At this point, housing remains on the sidelines of a weak economic recovery as consumers and builders wait for clear and consistent indications that jobs and economic output are reviving. Meanwhile, the problems that builders continue to confront in obtaining production financing, and in maintaining performing lines of credit, threaten to significantly slow the onset of a housing recovery."

Stocks in the homebuilder sector were mostly lower Tuesday morning.

The SPDR S&P Homebuilders ( XHB) and iShares Dow Jones US Home Construction ( ITB), exchange-traded funds that track the sector, fell 0.6% and 1%, respectively, in first thirty minutes of trading.

Among individual builders, Toll Brothers ( TOL) was 0.5% lower. Toll Brothers surprised investors with a return to year-over-year profitability in its fiscal fourth quarter, and recently said deposits jumped 10% in the second half of November compared with year-earlier results.

Lennar ( LEN) lost 0.8%. Last week, Lennar posted better-than-expected fiscal-fourth quarter earnings but said new-home deliveries were down 12% .

Small-cap builder KB Home ( KBH) fell 1.9% Tuesday morning. KB Home recently posted a surprise quarterly profit and said fewer homes delivered in its recent quarter was partially offset by an increase in the average selling price.

Elsewhere, D.R. Horton ( DHI) fell 1% and PulteGroup ( PHM) was flat.

Hesitancy among potential home buyers has been a key driver of builders' low sentiment in recent months as uncertain consumers did not yet feel secure enough with the jobs market and overall economy to make such large purchasing decisions.

Pending home sales rebounded 3.5% in November but remained 20.5% lower than in the year-earlier month.

New-home sales rose 5.5% in November but were 21.2% below year-earlier levels. Sales of newly built homes are expected to have risen to an annualized rate of 300,000 in December, from 290,000 in December. January's new-home sales data is expected to be released on Jan. 26.

-- Written by Miriam Marcus Reimer in New York.

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