In January, new homes sales dropped unexpectedly to a record low.

New home purchases have dropped 11 percent to an annual pace of 309,000 from an annual pace of 348,000. The average home price has also dropped 2.4 percent from January of 2009.

“The foreclosure flow is robbing demand from the new-homes market and that process seems to be strengthening,” said Julia Coronado, a senior economist at BNP Paribas in New York, “The new-homes market just can’t get off the floor. If new homes suffer, construction suffers and jobs suffer.”

Economist had predicted new homes sales to increase to 345,000 annual pace.

After the report the Standard & Poor’s 500 index has increased 0.2 percent to 1096.27.

Of the four regions of the United States, three of the regions reported a drop in sales. In the northeast home sales have dropped 35 percent. Home sales have dropped 12 percent in the west and 9.5 percent in the south. The Midwest was the only region to have an increase in sales of 2.1 percent.

In January, the average home price has dropped to $203,000, which is the lowest since December of 2003.

Foreclosures remain a high treat to the housing recovery. 3 million homes are expected to go into foreclosure by the end of the year. Unemployment and low home values are making it difficult for homeowners to pay mortgages and sell their homes. In 2008, 2.82 million homes went into foreclosure.

In February the consumer confidence dropped to its lowest level since April of 2009, reported the Conference Board.

According to Bernanke, there have been signs of stabilization of the labor market such as less job cuts and a rise in factory workers.

“Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce,” Bernanke said in testimony to the House Financial Services Committee.

Unemployment is expected to average at 9.8 percent this year.