Homebuilder stocks fell Monday after a closely followed builder sentiment index dropped to the lowest level since 1995.

Rising mortgage rates, affordability issues and the retreat of investors/speculators from the housing market hurt builders' outlook on the new-home market, according to the National Association of Home Builders/Wells Fargo Housing Market Index for June. The index dropped four points from May to hit 42 in the latest report.

Among the biggest losers after the report Monday were

NVR

(NVR) - Get Report

, with shares falling 4.9%; and

Technical Olympic

( TOA), down 4.8%. Shares of

Meritage Homes

(MTH) - Get Report

dropped 3.3% and

Centex

(CTX)

fell 2.5%.

KB Home

(KBH) - Get Report

, which last week joined a slew of other builders in

reducing its earnings guidance, shed 1.3%.

"We now expect new-home sales to be off by 13% from the record posted in 2005. Single-family starts, supported by large builder backlogs of unfilled orders and some continuing reconstruction in the wake of last year's hurricanes, should be down by about 9% from the 2005 record," said NAHB Chief Economist David Seiders in a statement.

"These forecasts naturally are subject to a considerable degree of risk," he added. "The downside risks include the potential for large numbers of sales cancellations and re-sales by the investor/speculator group as well as more aggressive tightening of monetary policy than we're assuming in our baseline forecast."

The decline in builder confidence was broad-based and registered in every region this month, the NAHB said.

On Tuesday, the government releases data on housing starts. Economists expect a 1.87 million annualized pace for May, up from 1.85 million a year earlier, according to

Reuters

estimates.