Home builder sentiment nears record low in May

By Julie Haviv

NEW YORK (Reuters) - Home builder sentiment fell for the first time in four months in May, edging closer to the record low set in December, as market conditions continued to worsen, an industry group said on Thursday.

The National Association of Home Builders said its preliminary NAHB/Wells Fargo Housing Market Index fell to 19 from 20 in April, within one point of the record low of 18 set in December. The gauge started in January 1985.

The turn for the worse is indicative of the struggle home builders are facing as they grapple with the worst U.S. housing market downturn since the Great Depression.

"We hear anecdotes that in some regions in particular in California the supply coming to the market from home builders is now smaller than the supply coming from foreclosures," said Torsten Slok, senior economist at Deutsche Bank in New York.

The situation in the housing market remains gloomy and the home builders seem to be waiting for the foreclosure "tsunami" to pass, Slok said.

"The bright spot here is that we could see foreclosures peak over the coming quarters as a result of government initiatives and lower interest rates and that would be helpful to the home builders currently sitting on the sidelines," Slok said.

The May index came in one point below expectations based on a Reuters survey of economists.

Readings below 50 indicate more builders view market conditions as poor than favorable.