WASHINGTON - U.S. home-builder sentiment fell unexpectedly in March, hit by lack of credit for new projects and a flood of foreclosed properties, the National Associati 536870913 1869488239

The NAHB/Wells Fargo Housing Market index fell two points to 15 in March, the group said in a statement.

Economists polled by Reuters had expected sentiment to remain steady at 17. A reading below 50 indicates more builders view sales conditions as poor than good. The index has not been abov 536870913 1696609584

The lack of available credit for new projects, the large number of distressed properties for sale and the continuing hesitancy of potential buyers due to the weak job market are definite 536870913 1819877495

That said, the inventory of new homes on the market is at an extremely low level, and we do expect a 25 percent improvement in new-home construction in 2010 over 2009 to rebuild inventor 536870913 2032165230

Distressed properties typically sell below their value, pulling buyers away from the market for new homes.

The housing markets government-led recovery is wavering and could harm the broader economys healing. The collapse of the housing market was the main cause of the worst economic downturn 1936289379

The NAHB survey also showed all three subindexes of the Housing Market Index fell this month.

The current sales conditions gauge slipped two points to 15, while the sales expectations measure for the next six months fell three points to 24. The traffic of prospective buyers index 1684631664 (Reporting by Lucia Mutikani; Editing by Andrea Ricci)