Home builders continue to lack confidence in the U.S. housing market, as reflected in the latest monthly National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released on August 15.

The overall HMI dropped two points from July 2007 to 22, its lowest level in 16 years. All three elements of the HMI declined in August. The index gauging current single-family home sales fell one point, to 23; the index of sales expectations for the next six months slipped two points, to 32; and the index measuring traffic of prospective buyers decreased three points, to 16.

“There is no question that problems in the subprime-mortgage sector have spilled over to other components of housing finance . . . delaying a revival of the single-family housing market,” said David Seiders, the NAHB’s chief economist. “We now expect to see home sales return to an upward path by early next year and we expect housing starts to begin a gradual recovery process by mid-2008. From there, the market will have plenty of room to grow in 2009 and beyond.”

The U.S. Department of Commerce on August 16 released its July 2007 figures for housing starts. According to the Commerce Department, 1.38 million units were started last month, a 6.1 percent drop from June and a 20.9 percent plunge from a year earlier. The seasonally adjusted annual rate of new-home construction is at its slowest since January 1997.

For more information on the HMI, click here. See the latest Commerce Department data here.