Two weeks ago there was growing optimism within the housing market. One budget later and there is every sign that we may re-enter a period of deepening pessimism with commentary to suit.

I’d be surprised if the latest British Bankers’ Association figures showing mortgage lending slowing isn’t seized on and thrown into the pessimism pot.

But as we swing from a rosy view of the housing market to the blues what is really happening?

Within the surge of commentary on the housing market that has followed the Budget, the release of GDP figures and the most recent gloomy forecast from the International Monetary Fund and the further splurge of views we can expect over the coming weeks I would pick out one voice that seems to have hit, for my money at least, the right pitch.

Richard Donnell – head of research at Hometrack and someone whose views are, in my opinion, well worth listening to – picks out an interesting point in his interpretation of his latest set of housing market indicators.

Yes, he says, there is a “real” pick up in demand. And the Hometrack figures do show a slowdown in price falls and an improvement in other indicators such as weeks to sell and percentage of asking price achieved on sale.

But he argues the uplift in the market is coming from buyers of family housing who are purchasing at low loan to value rates or those with cash and looking to snap up bargains that can be rented out at rental yields of 6% or more.

He doesn’t appear to say this in his commentary, but it is implicit, that the uplift in these particular sectors of the market will provide a disproportionate effect on the figures for the overall market given that activity is at such a low level.

This is all well and good and helps to paint a picture of happier times in the market, but what he does note is that the absence of first time buyers is a serious inhibitor to a broad based recovery.

He says: “The reality is that a broad-based and sustainable recovery in the housing market needs to be supported by a broad base of buyers. Only when first time buyers feel confident to enter the market in significant numbers can we really start to claim any ‘real’ green shoots of recovery.

“This suggests to us that the recent pick up in demand is largely seasonal and unlikely to be sustained over the rest of the year.”

And, despite the heavy emphasis within Budget 2009 on housing, Richard adds: “This week’s Budget offered little real hope for the housing market and in highlighting the scale of pressure on public finances in the years to come, re-confirms the continuing economic uncertainty to homeowners.

“As a result demand is set to remain constrained and we expect to see small monthly price falls over the rest of 2009 and into 2010.”

As for my take on the impact that this might have on construction, I’d say that the steady decline in prices is likely to continue to restrain private development activity.

The decision to build out a site or not is far from straightforward and the factors influencing the decision will vary greatly between each developer and each site.

But, that said, so much of the decision to build rests on the cost of land or the value placed on it within the calculations made by developers.

It is fair to say that almost anything can be sold at a price when it comes to houses, so developers can if the price is right “shift product”. However, the question facing developers considering building out a site is whether the expected sale price provides an acceptable margin and covers the cost put against the land.

Unfortunately much of the land on developers’ books was bought at prices that, if developed, would leave the developer realising a real loss. That presents the decision to build now and realise a loss or hope for an upturn. Little wonder that the appetite to build is low.