DALLAS (AP) — D.R. Horton Inc. will post a loss for the spring quarter after net orders fell 40 percent and the value of unsold houses is written down, the US homebuilder said yesterday, further evidence that the housing sector continues to sink.Horton said it took orders for 8,559 houses worth $2 billion in the three months that ended June 30, down from 14,316 homes worth $3.8 billion a year earlier. The decline was sharpest in California and less severe in the south-east.

The rate of cancelled orders was 38 percent.

"Market conditions for new home sales declined in our June quarter as inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging," chairman Donald Horton said in a statement.

Horton said the company has adjusted prices to cope with the deteriorating market. The Fort Worth-based builder said profits from operations will be dragged to a loss from "significant" write-downs of unsold houses, reflecting the falling value of homes on the market.

A glut of unsold new homes has pushed prices lower. Builders have responded by cancelling options on land where they had planned to build.

In March, chief executive Donald J. Tomnitz warned that 2007 would be a bad year in its entirety.

Horton's June-quarter orders fell 53 percent in California and more than 40 percent in the north-east, south-west and south-central states including Texas. Orders dropped 25 percent in the south-east.

Horton expects to report results from its fiscal third quarter on July 26.

Through the first nine months of the fiscal year, Horton said it took 27,313 orders worth $6.92 billion, down from 41,550 orders worth $11.36 billion in the same nine months a year ago.

Separately, Horton said in a filing yesterday with the US Securities and Exchange Commission that it had removed a clause in its revolving loan that limited dividends and other payouts to shareholders to half the prior year's net income.

The change will allow payouts to shareholders unless they cause the company to default on loan payments or violate other terms of the loan. The loan dates to December 2005 and is administered by Wachovia Bank NA.

Shares of Horton fell 61 cents, or 3.1 percent, to $19.18 in midday trading.

"We believe housing operating fundamentals are likely to get worse before they get better given still significant levels of oversupply, coupled with first full-quarter impact from the subprime debacle and the corresponding tightening in underwriting standards," Robert Stevenson, an analyst at Morgan Stanley, said in a report today. He rates D.R. Horton shares "equal weight."

D.R. Horton's impairment charges will be at least $250 million to $300 million after tax for the quarter, Stevenson estimates.