Redrow, one of the Midlands' biggest house builders, reported a 35 per cent fall in six-month pretax profit yesterday and warned of weaker margins and fewer sales than expected.
Redrow's projections were more cautious than those made by its bigger rivals earlier this week.
Both Persimmon and Barratt said they saw signs of hope for Britain's housing market, encouraged by fewer cancellations and more prospective buyers.
Redrow which sees market conditions becoming tougher said profit before tax slumped to £35.8 million in the six months to the end of December, as turnover dipped to £353.1 million from £387.7 million and legal completions decreased by 4.7 per cent to 2,111.
Contractor C A Blackwell is constructing one of the largest earth-retaining walls in Europe at the former Midland Quarry in Nuneaton, Warwickshire for Redrow Homes (Midlands). The site is being prepared for 271 new homes.
Redrow Homes has acquired a 6.75-acre site, due for multi-million pound regeneration at Stratford-upon-Avon.
The company said visitor levels had increased to its developments this year "but the markets in which we are operating are clearly challenging".
It added: "Our overall expectation remains that 2008 will present a more difficult trading environment than the industry has experienced for many years with lower levels of confidence in the housing market."
Chief executive Neil Fitzsimmons said: "We do probably appear more cautious but I've got to look at the data out there. Mortgage approvals are down around 30 per cent in January. That tends to be a pretty good leading indicator where activity levels are heading.
"I am cautious in that regard and I am also cautious in the sense that second-hand home market data is pretty cautious."
Redrow said pre-sold homes fell ten per cent to 1,694 units, as tightening in mortgage availability kept prospective buyers at bay.
It warned that legal completion in the current financial year would be three per cent lower than its previous forecast and would show a ten per cent annual fall as a result of more challenging housing market conditions.
Mr Fitzsimmons said activity levels since its January 10 trading update had weakened further, with sales down 35 per cent from a year ago against the 25 per cent fall seen in early January.
Gross margins from home sales were also set to weaken as net selling prices after incentives come under pressure due to the competitive sales market conditions, although operating margins would stay flat in the second-half as it continued to cut costs.
"The poor results are unlikely to improve in the second half although improving visitor levels may offer some comfort to the management. The company needs to address key strategic issues of land structure and product positioning," a Landsbanki analyst said.