One of the Midlands biggest housebuilders Redrow said home completions in the first-half to the end of December were down, in line with expectations, as conditions in the housing market became "significantly" more challenging.
Forward sales are down to 1,694 homes from 1,871 a year earlier. Redrow now expects a greater weakening in its operating margin than anticipated.
Neil Fitzsimmons, chief executive, said the spring selling season would be the key factor for the full-year prospects but he did not expect much improvement.
"Sales were running 20 per cent down in the first-half, so I do not think we will see much of a pick-up or change in the situation this spring," he said.
"We also do not expect any change in the mortgage availability tightening this spring, but it will be key to see if there is any signal that the credit squeeze begins to relax."
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 residential space will provide a mix of one and two-bedroom apartments as well as three storey, three bedroom townhouses, including 59 units for social housing. Redrow said that the next two months would provide a clearer view of prospects for the full year, with consumer confidence and the availability of mortgage finance as key factors in determining the strength of the critical spring housing market.
"We will see what happens with activity levels and if prices remain flat as the major lenders are predicting," said Mr Fitzsimmons, adding that any fall in interest rates would be "helpful".
Redrow legally completed 2,111 new homes in the first-half, including 151 at Redrow Regeneration, compared to 2,214 a year earlier, at an average price of about £163,000, up from £162,400.
The company's land bank stood at 19,900 plots at December 7, compared to 21,200 plots a year earlier.
A softening in the land market also led it to become more selective in selling off building space and it expected to report land sale profits about £5 million lower than the same period last year. This will also impact margins, it said.
But the company struck a positive note for its long-term future.
It added: "Whilst 2008 may represent a more difficult market than the industry has experienced for some time, the fundamental need in the UK to increase the supply of new homes offers significant opportunities for Redrow into the future."
The firm made pretax profits of £120.5 million in the year to June 30.