The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) of builder sentiment continues to slide in 2007, tying the all-time low of 20 set in January 1991. The latest HMI report was released Tuesday afternoon. The report cites concerns about the substantial inventory of new homes for sale and the effects that deepening mortgage market problems are having on buyer demand as the primary reasons for the continued decline.

"Builders are expressing concern that home buyers are getting spooked by the many headlines they are seeing on mortgage market issues and their continuing effects on the housing market and home prices," said Brian Catalde, NAHB president. "Indications are that consumers are trying to time the bottom of the market before making their purchase, which historically can be a very tricky thing to do and is typically not an advisable strategy. The bottom line is, with the inventory situation what it is and the selection of units and deals to be had, now is a very good time to buy a home."

The HMI has dropped 16 points over the past six months but David Seiders, the NAHB's chief economist, says he expects an upswing near the middle of 2008.

"Certainly problems across the mortgage finance arena are taking their toll on buyer demand, which is weighing heavily on builder confidence measures," says Seiders. "Even so, availability of mortgages under the government-supported part of the market remains very good, and the long-term fundamentals of housing are solid in terms of projected household formations, income growth, and other factors. We now expect to see home sales return to an upward path by the second quarter of 2008, and we expect housing starts to begin a gradual recovery process by the third quarter of next year. At that point, the market will have substantial growth potential."

The NAHB/Wells Fargo HMI, first introduced in January 1985, gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either good, fair, or poor on a monthly basis. In addition, the survey asks builders to rate traffic of prospective buyers as either high to very high, average, to very low. Scores are then used to calculate a seasonally adjusted index.

According to the report, all four regions of the U.S. are reporting declines in the September HMI ratings. The Northeast posted a three-point decline to 26; the Midwest posted a single-point decline to 13; the South posted a two-point decline to 22; and the West posted a four-point decline to 18.