Aug. 18 (Bloomberg) -- Confidence among U.S. homebuilders was unchanged in August at a record low, signaling there is no relief in sight from the worst housing slump in a quarter century.

The National Association of Homebuilders/Wells Fargo sentiment index held at 16 for a second month, the Washington- based group said today. Readings under 50 mean most respondents view conditions as poor.

Builders are delaying projects as sales drop, foreclosures throw more houses on the market and prices tumble. Job losses, stricter lending rules and growing buyer pessimism indicate builders will need to cut prices further to stimulate demand.

``Homebuilders are seeing few bright spots in the sales picture right now,'' said Abiel Reinhart, an economist at JPMorgan Chase & Co. in New York. That's ``no surprise given that mortgage rates are up, lenders keep tightening their standards, the economy is weak, and there are many existing home sales competing for buyers.''

Economists surveyed by Bloomberg had forecast the index would be unchanged, according to the median of 45 projections in a Bloomberg News survey. Estimates ranged from 15 to 17.

The gauge, which was first published in January 1985, averaged 27 last year. The survey asks members to characterize current sales as ``good,'' ``fair'' or ``poor'' and to measure prospective buyers' traffic as well as to assess the outlook for six months from now.

The measure of current single-family home sales improved to 16 from 15 in July. Projections for sales six months from now rose to 25 from 23.

Little Traffic

The NAHB index of buyer traffic was unchanged at a record low of 12 for a second month. The measure represents the number of prospective buyers visiting properties.

The increase in two of the three components ``may be an indication that we are nearing the bottom of the long downswing in new-home sales,'' said NAHB Chief Economist David Seiders in a statement. ``Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond.''

Sentiment improved in two of four regions. It rose to 16 from 14 in the Northeast, and to 14 from 10 in the Midwest. The index was unchanged at 20 in the South and fell to 11 from 14 in the West.

Other housing measures continue to show weakness. Total single-family home sales in June were down 37 percent from a peak reached in July 2005, the biggest drop since 1982. Home prices in 20 U.S. metropolitan areas fell 15.8 percent in May from a year earlier, the biggest decline since records began seven years ago.

Federal Aid

The government has stepped in to try to prevent further damage. President George W. Bush signed a bill into law July 30 aimed at helping 400,000 homeowners facing foreclosure. The measure provides federal insurance for refinanced 30-year mortgages for homeowners struggling to make monthly payments and allows the government to inject capital into Fannie Mae and Freddie Mac, the two largest home finance companies.

Tomorrow, the Commerce Department may report that housing starts dropped to a 960,000 annual pace in July, the weakest level since 1991, according to the median estimate of economists in a Bloomberg News survey.

Builders may have to further curtail new projects as declining home sales and rising foreclosures have kept inventories elevated. Bank repossessions almost tripled in July and U.S. foreclosure filings increased 55 percent from a year earlier, RealtyTrac Inc. said last week.

Mounting Losses

D.R. Horton Inc., the largest U.S. homebuilder, on Aug. 5 reported its fifth straight quarterly loss as sales fell 36 percent and the Fort Worth, Texas-based company wrote down property and walked away from planned land purchases.

``We're continuing to cut at all levels,'' Chief Executive Officer Donald Tomnitz said during a conference call.

Banks are also stiffening loan requirements, the Federal Reserve said Aug. 11 in its quarterly Senior Loan Officer Survey. Most ``domestic institutions reported having tightened their lending standards and terms on all major loan categories,'' the Fed said.

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.

Last Updated: August 18, 2008 14:53 EDT