WASHINGTON – The confidence of U.S. home builders fell for the eighth straight month in September, dropping to the lowest level since February 1991, the National Association of Home Builders said Monday

The NAHB/Wells Fargo housing market index dropped by three points in September to 30 from a revised 33 in August, indicating that most builders think the housing market is poor.

Economists surveyed by MarketWatch expected the index to fall to 31.

A year ago, the index was at 65. A reading of 50 would indicate builder sentiment was balanced between good and poor.

The index peaked at 72 in June 2005 and has fallen eight months in a row. It’s the fastest decline in the 21-year history of the index, which has had a fairly good record of predicting the number of new homes started.

“Builders are adopting an increasingly cautious attitude in their near-term outlook for new-home sales,” said NAHB chief economist David Seiders. “They’re experiencing falling sales, rising sales cancellations, and increasing inventories of unsold units.”

Seiders said the builders’ industry group expects the correction to continue until the middle of 2007 and “gradually moving back up towards trend in 2008.”

Builders in all four regions of the country are pessimistic about the market. Sentiment fell by six points in the Northeast to 28. It fell by five points in the West to 38 and by three points to 38 in the South. The sentiment index held steady at 16 in the Midwest.

In September, two of three components of the home builders’ index fell and the other was steady. Current sales index fell to 32 from 37, the expected sales index dropped to 37 from 41, and the traffic of potential buyers’ index was steady at 22.

The rapid decline in the builders’ index in the past year has been echoed by lower sales, declining mortgage applications and reduced building. But no other housing indicator has fallen as fast as builders’ sentiment.

“This forward-looking indicator of construction activity signals further significant declines in starts in the months ahead,” said Haseeb Ahmed, an economist for JP Morgan Chase.

Other economists say the builders’ have reacted quickly to the drop in demand. “The sharp drop in permits and starts to date has already begun the process of correcting the overhang of new single-family houses,” said Robert DiClemente, U.S. economist for Citigroup Global Markets.

The Commerce Department will report on housing starts for August on Tuesday. Economists are looking for a 2.7 percent decline to 1.746 million, according to a survey conducted by MarketWatch. It would be the lowest level for starts since April 2003.

Housing starts have fallen about 21 percent since the peak at the beginning of the year. New-home sales are down about 22 percent from the peak last July.