Builders in the U.S. probably broke ground last month on the fewest houses in 17 years as slumping sales forced deeper cutbacks, economists said before a government report today.

Housing starts in April fell to a 939,000 annual pace, from 947,000 a month earlier, according to the median forecast of 73 economists in a Bloomberg News survey. A separate report today is forecast to show that Americans' confidence sank to a 26-year low this month.

Lower prices and bigger incentives have yet to revive demand, indicating builders will need to come up with even more discounts to attract buyers. Stricter lending rules, job losses and growing pessimism about the economy signal sales will not rebound quickly.

``Starts have nowhere to go but down,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. ``The problem with housing is demand has fallen just as sharply as production has fallen, which means that even more correction has to be done on the housing-production side.''

The Commerce Department's construction report is due at 8:30 a.m. in Washington. The projected reading would be the lowest since March 1991.

Building permits, a sign of future projects, declined to a 915,000 pace from 928,000 in March, according to the survey median.

Forecasts for housing starts ranged from an annual pace of 875,000 to 1 million. Building permits estimates ranged from 880,000 to 985,000.

Confidence Sinks

A report at 10 a.m. may show the Reuters/University of Michigan preliminary measure of consumer sentiment for May fell to 62 this month, according to the median estimate of economists surveyed. That would be the lowest reading since March 1982.

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