U.S. homebuilder confidence sank to a 15-year low in May as lenders made it more difficult for borrowers to qualify for mortgages and order cancellations mounted, the National Association of Home Builders said on Tuesday.
The NAHB/Wells Fargo Housing Market index dropped three points to 30 in May, matching the 15-year low set in September 2006, the group said.
Economists polled by Reuters had forecast the index would stay at April's 33 reading.
Readings below 50 mean more builders view market conditions as poor rather than favorable.
Builder confidence has eroded each month since reaching 39 in February, before defaults and foreclosures started escalating on loans to borrowers with sketchy credit histories.
"The crisis in the subprime sector has infected other parts of the mortgage market as well as consumer psychology, and as a result the housing outlook has deteriorated," NAHB Chief Economist David Seiders said in a statement accompanying the index.
NAHB projects that home sales and building will not start improving until late this year. Early stages of a rebound will be "quite sluggish," the group said.
"Builders are feeling the impacts of tighter lending standards on current home sales as well as cancellations, and they are bracing for continued challenges ahead," NAHB President Brian Catalde, a home builder from El Segundo, California, said in the statement.