Horton, which does business in Hawaii as D.R. Horton-Schuler Division, said today it will post a loss from operations for its latest quarter after net orders fell 40 percent and it wrote down the value of unsold houses.

The report provided more evidence that the housing sector continues to sink.

Inventories of unsold used homes are at their highest level in 15 years. Experts blame tougher rules on qualifying for mortgages. They also say the slowdown is a normal comedown after several years of strong sales.

"It's going to be another year-and-a-half before we see stability or growth," said Leslie Appleton-Young, chief economist of the California Association of Realtors. "We certainly haven't bottomed out yet."

Horton shares fell 39 cents, or 2 percent, to $19.40 after sinking to a new 52-week low of $19.16 earlier in the session.

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 Southeast.

The rate of canceled 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.

The Fort Worth-based builder, which plans to report results from its fiscal third quarter on July 26, said it expects a loss from operations as a result of "significant" write-downs of unsold houses. The write-downs reflect the falling value of homes on the market.

A glut of unsold homes has pushed prices lower — Horton said it has adjusted prices to cope with the deteriorating market. Builders have also been throwing in extras to entice buyers.

But neither freebies nor lower prices have brought in enough traffic, particularly for entry-level homes where the pool of available buyers is being reduced by tougher mortgage-underwriting standards.

Builders have tried to reduce supply by canceling options on land where they had planned to build.

Horton's June-quarter orders fell the most — 53 percent — in California. Horton was building entry-level homes in Sacramento and other inland markets that emerged as affordable alternatives to the pricey coastal markets but are struggling now.

The inventory of unsold existing homes in California hit 10.7 months in May, well above the normal 7 percent range, according to the California Association of Realtors. Inland markets are weaker than the coast, such as the San Francisco Bay area, where the inventory in April was 3.5 months.

Nationally, the inventory of unsold homes in May was 4.43 million — an 8.9-month supply, according to the National Association of Realtors. That's up from 6.4 months a year ago and the highest level since June 1992, said Walter Molony, a spokesman for the group.

Edward E. Leamer, director of the Anderson Forecast at UCLA, said housing markets are probably weaker than statistics suggest because more homeowners would like to sell but have decided to wait out the slump.

"Builders have made price concessions, but even at that they still haven't cleared out their inventories," Leamer said. "We keep looking for some blue sky, some sign that the market is improving, but we just don't see anything out there."

Horton's problems spread far beyond California. Orders fell more than 40 percent in the Northeast, Southwest and South-central states including Texas. The smallest decline, 25 percent, was in the Southeast.

The 40 percent decline in orders for the April-June period followed large declines the previous two quarters. For the first nine months of its fiscal year, Horton said orders were down 34 percent from the year before, when many housing markets were still strong.

"It will start looking a lot smoother next year," James P. Gaines, an economist at the Real Estate Center of Texas A&M University, said of the year-to-year sales numbers. "It will go back to plus or minus less than 10 percent — until some other shock hits the market, like a recession or lower interest rates."