Builder confidence slips again.

Increased concerns about interest rates and housing affordability caused builder confidence in the market for new single-family homes to slip three more notches to 39, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, reported today.

"The HMI is down from its most recent cyclical high of 72 in June of last year, and reflects growing builder uncertainly on the heels of reduced sales and increased cancellations related to eroding affordability as well as an ongoing withdrawal of investors/ speculators from the marketplace," said NAHB Chief Economist David Seiders.

"But just as concerning to many builders is the potential for more monetary tightening by the Federal Re serve that could drive interest rates, and thereby homeownership costs, even higher.

Ironically, the Fed's inflation-fighting moves have helped firm up the rental market and raise the 'owners' equivalent rent' components of the core inflation measures that the Fed is seeking to contain," Seiders added.

Derived from a monthly survey that NAHB has been conducting for 21 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor."

The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." All three component indexes fell in July.