The National Association of Home Builders Wells Fargo housing market index plunged to a seasonally adjusted reading of 9 in November. The lowest ever since the index started in 1985. The index was at 14 in October after slipping 3 points from the September reading of 17.

Growing worries over the US financial crisis plus increasing unemployment and falling consumer confidence are the reasons for the sharp drop in builders’ confidence as NAHB said Tuesday.

A reading above 50 indicates a positive sentiment about the market. However, the index has drifted below 50 since May 2006 and below 20 since April 2008 showing that that the number of builders thinking home-sales conditions are negative outnumbered those who think the market is generally well.

November's reading was the sixth record low set or matched in the past seven months.

"Today's report shows that we are in a crisis situation," said Sandy Dunn, the NAHB chairman, in a statement. "Tremendous economic uncertainties have driven consumers from the housing market, and it's going to take some major incentives to bring them back."

The latest builder index covers in a survey 422 residential developers across the nation. In the survey, builders were asked for their view of the current market condition, the number of buyers looking at homes and expectations for the next six months.

Builders' estimates of current sales conditions fell six points to eight, while the index of foot traffic by prospective buyers dropped four points to seven. Builders' expectations for sales over the next six months remained at 19, the NAHB said.

Declines in builder confidence were evident across the U.S., with the biggest fall in the Midwest, where confidence declined by six points. Builder confidence in Northeast, South and West builder plunged five points.

The future outlook was grim. Of the builders surveyed, 49% plan to build fewer homes in the first half of 2009 compared to the second half of 2008, while just 16% expect to build more homes. Overall, builders said they anticipate constructing 17% fewer homes in the first six months of next year compared to the last half of this year.

"The housing downturn has already cost America three million jobs in construction and related industries, and this downward momentum cannot be stemmed without substantive government intervention," said David Crowe, NAHB’s chief economist.

With the current scenario, builders were ever more convinced that only government intervention will help stem the downward trend in home prices and increasing foreclosures that have led to a housing glut limiting the demand for new and pre-owned homes.