The National Association of Home Builders showed that its housing market index came in at 19 in December. The lowest level since the index began in January 1985.
Index readings higher than 50 indicate positive sentiment. The seasonally adjusted index has been below 50 since May 2006, and declined for eight straight months this year, and has been unchanged since October.
Tighter lending standards, rising defaults among borrowers with weak credit and a sense of worry about the housing market's future have meant fewer buyers for hard-hit homebuilders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp.
By the second half of next year many builders will scale down their inventories and reposition themselves for the time when market conditions can support an upswing in building activity," David Seiders, the trade group's chief economist, said in a statement.
Confidence dropped in the northeast, but inched up in the Midwest and South. It remained unchanged in western states.
On the whole, new-home sales are projected to fall to 788,000 this year, down 25 percent from 1.05 million last year. Sales are expected to drop further to 693,000 in 2008, according to the Realtors' group.