Homebuilder stocks tumbled Tuesday after a closely watched builder confidence index dropped to the lowest level since the last major U.S. housing slowdown over a decade ago. The report added more negative sentiment to a sector that has been in rapid selloff mode since last week, when D.R. Horton ( DHI), the country's largest homebuilder, slashed its earnings guidance . Increased concerns about interest rates and housing affordability caused builder confidence in the new single-family homes market to drop to a reading of 39 for July, according to the National Association of Home Builders/Wells Fargo Housing Market Index, or HMI. The index gauges builder perceptions of current sales and expectations for the next six months; any figure below 50 means more builders view sales conditions as poor than as good. "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," NAHB Chief Economist David Seiders said in a statement. In terms of historical comparison, the downward movement of the confidence index is essentially in line with readings from the 1994-to-1995 U.S. housing slowdown period, the NAHB said. During this period, the Federal Reserve tightened monetary policy, and the housing market went through a fairly orderly cooling-down period, Seiders said. However, a recent analyst report suggests that the downturn this time around will be uglier, claiming that a comparison to the 1987-to-1991 housing downturn (which was worse than the 1994 period) is more warranted. Raymond James analyst Rick Murray says the inventory levels are more challenging today, on the basis of absolute levels of inventory (565,000 today vs. 358,000 in the late 1980s) as well as months' supply of homes on the market (5.8 months today vs. 5 months then).