More Misery for Housing

On Monday, Federal Reserve Chairman Ben Bernanke said "the further contraction in housing is likely to be a significant drag on growth in the current quarter and through early next year."

Paulson's comments came on the same day that D.R. Horton(DHI Quote), the country's largest homebuilder by deliveries, reported a 39% drop in new home orders for the quarter ended Sept. 30. The decline was particularly disappointing because it came against easy comparisons from a year ago, when the housing collapse was already underway.

Also on Tuesday, the National Association of Homebuilders reported that its builder confidence index hit a new low in October due to continuing problems in the mortgage market and the oversupply of inventories.

The National Association of Home Builders/Wells Fargo Housing Market Index fell two more points to 18 in the month, the lowest point since the series began in January 1985. A number under 50 indicates that more builders view sales conditions as poor than good.

"Builders in the field are reporting that, while their special sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values," said NAHB President Brian Catalde in a statement.

Homebuilder stocks, which had been enjoying a revival in recent weeks, were mostly lower amid the latest round of bad news. D.R. Horton was falling 53 cents, or 3.9%, to $13.05, while KB Home (KBH Quote) was slipping 91 cents, or 3.3%, to 26.79. Lennar (LEN Quote) was losing 43 cents, or 1.8%, to $23.20, and Toll Brothers (TOL Quote) shed 49 cents, or 2.2%, to $21.66.