Updated from 6:45 a.m. EST

Centex ( CTX) warned of a steep third-quarter loss as the homebuilder takes writeoffs on land and land options that it won't use in a soft housing market.

The Dallas-based company said it expects to lose $2 a share from continuing operations for the third quarter ended Dec. 31, hit by a $300 million land valuation adjustment and $150 million of option deposit and preacquisition walkaway costs. The quarter will also include a $60 million provision tied to a federal tax audit.

Excluding those costs, Centex expects to post a profit of 75 cents a share for the quarter, shy of the 81-cent Thomson Financial target.

The company said closings dropped 12% from a year ago in the third quarter, while orders slid 24%.

"We are navigating through one of the most challenging housing environments in the past 25 years," said CEO Tim Eller. "We are responding by reducing our land position and inventory, aligning our workforce to the current sales pace and improving our overall cost structure."

Separately Tuesday, KB Home ( KBH) said it would write off $88 million of land option contracts and record $255 million of land impairments for the fourth quarter. The charges are within the company's prior guidance.

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