Homebuilders' shares tumble on analysts' grim view

Tag : Dried Persimmon

Shares of homebuilders suffered broad declines onWednesday after analysts at two top brokerages took negative viewson them, citing increasing likelihood of land bank writedowns amidan intensifying housing downturn.

Goldman Sachs and Merrill Lynch downgraded some stocks and cutprice targets on others. They include Persimmon (PSN.L: Quote , Profile , Research ), the country's biggest housebuilder by market value and No. 3 byhomes built, and Barratt Developments (BDEV.L: Quote , Profile , Research ), the second largest homebuilder by volume.
"We have gone beyond the tipping point and are now clearly seeing aUK housing market being squeezed on opposing fronts -- by a lackboth of willing lenders, as well as willing purchasers," wroteMerrill Lynch analyst Mark Hake.

"Note once again the critical importance of unemployment levels asthe single most important determinant of consumer confidence andhousing transactions; this was the case in the early 1990srecession," Hake said.

The UK housing market, which enjoyed a boom stretching back to themid-1990s in which prices more than tripled in many cases, hasground to a halt as competition in the mortgage market all butdisappeared and availability dried up as a result of the globalcredit crunch, leading to big falls in house prices in recentmonths.