The NAHB released its Housing Market Index measure of home builder confidence today, which showed that confidence among builders has fallen to a 16-year low:

With a reading of 28, the HMI now is at the lowest level in its current cycle and has reached the lowest point since February 1991. “Builders continue to report serious impacts of tighter lending standards on current home sales as well as cancellations, and they continue to trim prices and offer a variety of nonprice incentives to work down sizeable inventory positions,� said NAHB President Brian Catalde, a home builder from El Segundo, California.

The NAHB has become increasingly bearish on housing in the last two months, saying in May it expected a housing recovery “late in the year.” Now? Even more bullish — no recovery until 2008, and a prediction of housing’s drag on the overall economy:

“It’s clear that the crisis in the subprime sector has prompted tighter lending standards in much of the mortgage market, and interest rates on prime-quality home mortgages have moved up considerably during the past month along with long-term Treasury rates,â€? added NAHB Chief Economist David Seiders. “Home sales most likely will erode somewhat further in the months ahead and improvements in housing starts probably will not be recorded until early next year. As a result, we expect housing to exert a drag on economic growth during the balance of 2007.â€?

You know if the builders are getting bearish, things aren’t looking too good.