WASHINGTON — Homebuilders' pessimistic outlook improved slightly this month, but it remains dim amid falling home prices and a weak pace of construction.

The National Association of Home Builders said Tuesday that its index of industry sentiment for March improved slightly to 17. That's the first gain in five months, after four straight readings of 16. Any reading below 50 indicates negative sentiment about the market. The index hasn't been above that level since April 2006.

Last year was the worst in more than a decade for sales of previously owned homes and the worst for new-home sales in nearly a half-century.

Fewer homes mean fewer jobs. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the builders' trade group.

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High unemployment, tighter bank lending standards and uncertainty about home prices has also kept many people from buying homes, despite low mortgage rates and home prices that have fallen by more than half in some markets since the peak of the housing boom. The industry received a boost in the first half of 2010 when the government offered tax credits to home-buyers. Once they expired in April, home sales plummeted.

Economists say home prices will hit bottom this year before a modest recovery takes hold. Large swaths of the hardest hit states, including Arizona, California, Florida and Nevada, continue to struggle with foreclosures and short sales, when a lender allows a borrower to sell their property for less than what is owed.

Still, the March reading is the highest for the builder index since last May, when it reached 22. The spring season is traditionally the best for home sales.

Regionally, the Northeast saw a one-point decline to 20 and the Midwest was steady at 12. The South jumped from 18 to 20 and industry sentiment in the West rose from 13 to 17.

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