Lennar, the second-largest US homebuilder, on Tuesday warned that sellers of existing homes are starting to accept lower prices in a move which could force the industry to accelerate its own discounting strategy.

Stuart Miller, chief executive of the Miami-based group, said existing home owners had “sat on the sidelines” during a downturn driven by oversupply and the difficulties in securing mortgage finance caused by the subprime crisis..

Builders have responded by cutting prices and construction in an effort to clear the backlog, but Mr Miller said market conditions had continued to deteriorate as a lack of consumer confidence spread to the far larger existing-home sector.

“The existing-home market is now moving much more rapidly to adjust [prices] downwards,” he told analysts as the group reported a net loss of $513.9m in the three months to August 31. “August really seems to be a melting pot of all things negative.”

Economists have warned that national home prices may have to fall by as much as a fifth to clear a backlog of unsold properties swelled by speculators selling out and rising delinquencies. Mr Miller said uncertainty over the level of foreclosures could still see the inventory increase before the end of the year.

The recent US interest rate cuts have done little to boost confidence among potential buyers, according to industry executives. “It will most certainly not be a panacea,” said Mr Miller. “[And] we have not yet seen stability in the mortgage market either.”

Lennar, which has a national footprint focused on the ”sunbelt” states, was the first of the major builders to warn that the traditional spring selling season had failed to ignite. Its pessimism about the short-term outlook has proved accurate as builders have continued to report weaker selling conditions and take writedowns on their land and property holdings.

Revenues from home sales fell 44 per cent in the quarter, and its gross margin dipped to 14 per cent as the average selling price fell to $296,000 and incentives climbed from $35,900 to $46,000 per home.

Lennar said it had cut 35 per cent of its workforce and expected further trimming in the fourth quarter, and again declined to provide any financial outlook for the full year.

Most builders are focusing on securing their balance sheets by maximising cash flow and trimming expenses. While credit ratings have worsened and equity values have slumped – with Lennar’s stock down more than 55 per cent year-to-date – liquidity remains relatively strong as banks have continued to extend credit lines and relax covenants, reducing concern of a bankruptcy among the major companies.