For some months house builders have been pointing to the advent of spring in the hope that the traditional peak sales season for new homes would clear the grim clouds hanging over their depressed sales figures.

In fact, the metaphorical rain has not eased and what originally looked like an early April shower has turned into a sustained storm, with little prospect of improving conditions in coming months.

Last week, a leaked confidential survey from the Home Builders Federation showed that year-on-year net reservations in the past two weeks were down by almost two-thirds, figures that caused yet another day of concerted share price declines on Thursday.

The previous benchmark had been a 30 per cent decline in net reservations, the figure that Persimmon reported on April 24. Before that, the industry hoped the 20 per cent fall in the opening months of the year would mark a low point.

Net reservations are the number of buyers putting offers in for new homes, usually putting down a small deposit, minus those buyers walking away from agreed sales. It is that second figure that has soared as buyers have struggled to obtain mortgages.

One person familiar with the industry says that one volume house builder last month reported one week of “negative sales”, as more people walked away from their deposits than joined the reservations list.

Alastair Stewart of Dresdner Kleinwort thinks it is the end of the party for house builders. “The industry has been kept afloat for 13 years by house price inflation, which has flattened the creases in their business operations by flattering the value of their land banks.”

The impact that weak demand has on land values is at the core of a crisis brewing in the sector.

Most house builders have several years of land in stock, which has risen in value in line with house price inflation. It has traditionally been their biggest asset, one that could be quickly turned into cash.

Not anymore. Several senior industry figures privately admit that no one is buying land any more. The uncertain demand for future homes and the very certain pressures on the sector’s balance sheets means that no real market for land exists, a situation not seen since 1974, widely seen as the worst year for housing since the second world war.

Shareholders have already largely discounted the value of the house builders’ land. In the case of Barratt and Taylor Wimpey, two of the largest builders, the total value of their shares is less than half their net asset values. A write-down by the biggest builders is mooted if conditions get bad enough.

Taylor Wimpey on Friday announced a reorganisation of its operations, with three senior executives leaving its UK management team and an unspecified number of regional offices to be closed in an attempt to cut costs.

The next two weeks should give an indication of how the sector is faring, with Bovis management facing its shareholders on May 9, followed by Redrow and Barratt trading updates on May 13 and 14, respectively.

Both builders are expected to reflect the gloom in the industry, but of particular concern to investors is Barratt, which has the most stretched balance sheet following its £2.2bn acquisition of Wilson Bowden a year ago. Its shares closed at a new low of 269¼p on Friday, some 80 per cent down since the start of 2007.

Expectations in the market are that a rights issue is increasingly likely from Barratt, which has debts of £1.7bn ($3.3bn) set against assets – its £3.4bn land bank, built real estate and goodwill from its acquisition – whose value have fallen.

Analysts agree a rights issue would send further shudders through the sector.