Housing market shows signs of meltdown

By Dan Lalor

LONDON (Reuters) - Two bellwethers of the housing market gave further evidence of the industry's downturn, but the sector has been so battered in recent sessions that share prices rose on Thursday on relief the news was not worse.

Low-cost housebuilder Bellway warned of a bigger than expected fall in annual sales after reservations this spring fell nearly a third as buyers struggled to get mortgages.

Separately, Britain's biggest mortgage lender, Halifax said house prices fell 2.4 percent in May to leave them 3.8 percent lower year-on-year.

The housing market has ground to a halt as competition in the mortgage market all but disappeared and availability dried up as a result of the global credit crunch, leading to big falls in house prices in recent months.

"There has been no sign of the normal spring selling surge... The restricted mortgage supply, combined with a sapping of consumer confidence, is leading to further market weakness," Bellway said.

Its warning was the latest in a series led by Persimmon, Britain's biggest housebuilder by market value and No.3 by homes built, which said in April its sales so far in 2008 were down 24 percent.

Bellway shares, which touched a five-year low at 560.5 pence on Wednesday, were up 4.0 percent at 618 pence by 10 a.m. They have fallen from a record high at 1,701 pence set in April 2007, with similar declines among other housebuilders.

"We know from comments from other housebuilders that the state of the UK housing has deteriorated rapidly," said Landsbanki analyst Simon Brown, who cut his price target for Bellway shares to 750 pence from 1,050p and his 2007-08 profit forecast by 12 percent to 180 million pounds.