Housebuilders are suffering today. First came news that mortgage approvals have fallen again, then Credit Suisse issued a downbeat note on the sector.
It said: "Despite what appears to be an attractive sector valuation we retain our cautious stance on the UK housing sector, waiting for either further retrenchment in the valuations or evidence of stability in the underlying housing market before we would consider turning positive on the sector.
"We believe that continued problems in the credit markets and their subsequent impact on the mortgage market will result in materially lower volumes in 2008. Such a drop-off in volumes will, in our view, increase the pressure on selling prices, which
we expect to fall this year."
It has cut its price target on Persimmon - down 30p at 763.5p - from 630p to 615p with an underperform rating. It moves Barratt Developments - up 0.75p to 443.75p - from 530p to 485p but with an outperform recommendation.
Elsewhere Numis analyst James Hamilton tackles the question of whether the credit crunch is over and comes up with the answer: no.
He says: "Financials have had a strong bounce from recent lows with UBS and Lehman raising capital. Is the worst of sub prime losses over? On balance we think probably yes although undoubtedly we expect further losses.
"Is the credit crunch over? Without doubt no. Three month Libor continues to run 75 basis points ahead of Bank of England base despite the expectation that interest rates will be cut and only yesterday First Direct was the latest bank to suspend mortgage lending. No doubt they will return with more expensive deals. This process of increasing borrowing costs in the UK has just started and in the long run should benefit the strong banks.
"The UK debt mountain is the real problem that the UK banks have: last year was quite good for UK banking with full employment, above trend GDP growth providing relatively benign credit environment. Even the 1-2 million people who have structurally too much debt were able to tap the equity in their homes (again) to stave off the inevitable bankruptcy. With household debts to disposable income having increased to 175% an all time high and 1.4 times the US ratio there is a structural debt problem. We think that banking growth will be all about the liabilities side of the balance sheet over the next decade just as it was all about the assets side of the balance sheet over the past decade."
He concludes: "We would look to sell the rallies as the deleveraging of the UK consumer and a return to savings drives a recession and an impairment surge."
Three month Libor, by the way, has slipped again to 6.003%, down from 6.005%.
