The National Association of Home Builders/Wells Fargo Housing Market Index sank in September to its historic low of 20, a level last reached during the housing recession in 1991.

The NAHB said the decline of two points from August was due to concerns about the inventory of new homes for sale and the effects that deepening mortgage market problems. "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 NAHB President Brian Catalde, a home builder from El Segundo, Calif. "Indications are that consumers are trying to time the bottom of the market before making their purchase."

"Certainly problems across the mortgage finance arena are taking their toll on buyer demand, which is weighing heavily on builder confidence measures," said NAHB Chief Economist David Seiders. "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 index was calculated and released before the Federal Reserve made its historic decision to cut key interest rates on Tuesday afternoon.

Two out of three component indexes declined in September, with the index gauging current single-family home sales declining two points to 20 and the index gauging sales expectations for the next six months falling five points to 26. The index gauging traffic of prospective buyers held steady at 16 for the month.

All four regions of the country reported declines in their September HMI readings. The Northeast posted a three-point decline to 26, while 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.