Dalia Fahmy

It's sad but true. Americans are increasingly filing for bankruptcy in order to avoid foreclosure.

Katherine Porter, a bankruptcy expert at Harvard Law School, estimates that 75 percent of Chapter 13 filings fall into this category. "Despite all the government programs, bankruptcy is probably the most commonly used foreclosure prevention technique," Porter tells HousingWatch.

If you'd like to file for bankruptcy but are worried about your credit, Porter says don't worry. "Those who have a foreclosure filing against them, their credit score has already taken such a big hit that the additional blemish of bankruptcy is not particularly significant," she says.

It's sad that we've had to resort to this, but the truth is that bankruptcy filing stops the foreclosure process cold. Lenders aren't even allowed to try collecting debts until a judge gives them the OK.

It's only a short reprieve though, says Porter, lasting a couple of months at the most because by then most court cases have been resolved.

You can't blame them for trying to make lemonade. Toll Brothers, the nation's largest builder of luxury homes, says it has launched an investment firm to take advantage of the housing bust.

Gibraltar Capital and Asset Management, a wholly-owned subsidiary, will trade distressed property and loan portfolios, take over struggling construction projects and resell them to other builders, and help banks and developers deal with the distressed real estate on their books.

Translation: Toll Brothers, which made a ton of money selling pricey homes during the boom, is now using that money to scoop up some of those properties at cents to the dollar. Makes perfect business sense, right?

Doug Yearley, Toll Brothers' CEO thinks so, too. "We believe there are many potential investments arising from the distress in the real estate industry," he says in a press release, adding that the company plans to tap into its relationships, expertise, and of course, "capital access" to "add value."

How does this affect you?

Credit Suisse is putting numbers to something we already suspect: The gap between the cost of owning and renting an apartment has halved in the past two years. In some locations, it's even cheaper to rent an apartment than to own.

In a research report, the firm says the percentage of median household income needed to pay the mortgage on a median-priced home is at a 30-year low, thanks to record low mortgage rates and cheap home prices. It singles out Washington, D.C., California's Inland Empire, Las Vegas and Phoenix as areas where it's cheaper to own than rent.

What a difference a month makes.

MacroMarkets' June "home price expectations index" released this morning shows that 56 percent of surveyed experts see home prices dropping this year, compared with only 40 percent who thought so in May. In other words, experts -- the 106 economists, analysts, consultants and academics surveyed -- are becoming more pessimistic.

It's not a huge drop. The mean consensus is for a 1.36 percent drop in 2010, followed by a gradual recovery that would take prices up 10.46 percent by the end of 2014. By comparison, last month the consensus was for no change in prices this year, and a 12.36 percent price over four years.

Sometimes it seems that economists are just trying to read a crystal ball. Why the change in sentiment?

Bill Smalley, an analyst at MacroMarkets, tells AOL HousingWatch that it could be fairly technical. The experts are supposed to be predicting prices according to the S&P Case-Shiller Index, which has a two-month lag. So after the MacroMarkets' May survey already had been published, S&P Case-Shiller's March data came in weaker than expected.

It's official: The housing market stinks. So when's the turnaround coming?

Sales of new homes went into a freefall in May without the government's artificial lifeline. No wonder homebuilders were feeling so glum in June. Analysts were expecting a dip in the housing market, but nothing this bad.

New home sales dropped 32.7 percent from April, the Commerce Department reported, and 18.3 percent from the year before, to a seasonally adjusted rate of 300,000 units. That's the lowest level since the government started tracking home sales in 1963.

Not surprisingly, people are now starting to worry again about the threat of a double dip in the housing market.

Where are things headed now?

If you feel you got away too easily in the housing collapse, maybe you live in New York's Queens or on the outskirts of another big American city.

Keith Jurow at the Real Estate Channel recently posted an interesting piece, teasingly titled "A Housing Price Collapse in Queens New York Is Almost Certain," in which he argues that homeowners in Queens are a sorry mess who haven't gotten their comeuppance yet.

Citing figures from RealtyTrac and Trulia, among others, he calculates that as of June 16 there were 9,054 Queens homes that banks had put in default since February 2009, none of which had been foreclosed yet. More than 4,000 of those have mortgage debts above $400,000. By his count, at least 25,000 properties in Queens are delinquent in their payment by 60 days or more.

"What happens when the banks start putting into default the 25,000 seriously delinquent homeowners and foreclosing on the 9,000+ properties currently in default?" he asks.

Sales of existing homes dropped unexpectedly in May, according to data released today by the National Association of Realtors. Economists had predicted that sales would rise, buoyed by the home buyer tax credit. (The deadline for contract signings was the end of April, but buyers have until June 30 to close.)

Simply put, the economists were wrong.

Completed transactions of previously owned single-family homes, town homes, condos and co-ops, were at a seasonally adjusted annual rate of 5.6 million, down 2.2 percent from April but up 19.2 percent from May 2009. This means that if sales continue at the current rate, 5.6 million existing homes will change hands in 2010. Experts polled by Reuters had called for sales to rise 5.5 percent to 6.12 million units.

NAR economist Larry Yun explains that May sales dropped because of delays in mortgage processing, particularly for short sales. In addition, Congress's failure to reauthorize the National Flood Insurance Program is delaying closings, because the government stipulates that homes with federally insured mortgages in areas prone to flood to have flood insurance.

The NAR headlined its report with the cheery year-on-year figures, but we already knew we're off the bottom. The question is how robust is the recovery?

An apple a day keeps the doctor away, while a low mortgage rate ... keeps recession at bay?

That's the thinking at Morgan Stanley, where economists have published research arguing, among others things, that rock-bottom mortgage rates are helping the US economy avoid a double-dip recession.

In the report, Richard Berner and David Greenlaw acknowledge that the U.S. economy continues to face significant risks, such as potential spillover from Europe's sovereign debt crisis and a slowdown of housing demand after expiration of the homebuyer tax credit.

But they argue that the recent wave of refinancings, along with other factors such as lower energy costs, should offset any negatives.

"The dip in conventional 30-year mortgage rates to about 4.8 percent has triggered a minor refinancing boom," they write. "Reduced debt service will further add to discretionary spending power for many mortgage borrowers."

In plain English: Less money spent on servicing your mortgage is more money to spend on goods and services, such as sandals, pedicures and Lady Gaga's used jewelry. This spending goes straight to business' bottom lines, which then makes them more likely to hire. And that, in short, is how you fuel economic growth.

Unfortunately, not many economists agree with the premise.

What happens when there is bad housing news that nobody hears? Is it like the proverbial tree falling in the forest? Does it mean the bad news won't have a negative effect?

New construction of homes dropped by 10 percent in May from the previous month, to a seasonally adjusted 593,000, according to new figures released by the U.S. Commerce Department. The driver is clear: A 17.2 percent drop in single-family home starts after the expiration of the homebuyer tax credit at the end of April. The outlook isn't great, either. Building permits for new homes dropped 5.9 percent.

The data looks bad from almost every angle. The level of new home starts, at 593,000 units, is at its lowest since December 2009, while the rate of decline was the sharpest since March 2009. The drop in single-family home construction is the steepest since January 1991.

But while the figures were worse than most analysts polled by Thomson Reuters had expected, many experts are shrugging them off.

It was the tax credit, after all. Or so it seems.

One of the timeliest leading indicators for real estate prices -- the homebuilder confidence survey published by the National Association of Home Builders/Wells Fargo -- dropped five points, or 22 percent, in June to a reading of 17. That's the lowest level since March, when the housing tax credit started pushing buyers into the market.

Mike Larson, real estate analyst at Weiss Research, points out it's also the biggest monthly drop since the depths of the recession in November 2008.

"We all knew there would be some kind of give-back after the homebuyer tax credit euphoria last spring," he tells AOL HousingWatch, "but it's a sizable drop and more than what economists were looking for."

Larson's view could be heard from other experts today: The consensus is that the housing market is back in the doldrums after a fake boost of demand.

It's National Home Ownership Month, prompting lots of talk about the value of owning a home. The rhetoric isn't all bubbly.

Sheila Bair, the outspoken head of the Federal Deposit Insurance Corporation, recently questioned the government's role in promoting homeownership. The speech wasn't widely covered, but The New York Times' Joe Nocera drew attention to it in a column headlined "Wake-Up Time for a Dream."

"Sustainable home ownership is a worthy national goal," Bair told the Housing Association of Nonprofit Developers. "But it should not be pursued to excess when there are other, equally worthy solutions that help meet the needs of people for whom home ownership may not be the right answer."

Nocera calls her comments "a bit of honest heresy."

Always a popular comparison in real estate: Is it better to rent or buy?

Now, real estate website Trulia.com has launched a Rent vs. Buy Index, featuring the top 10 cities in each category. Some of the results were quite surprising.

Namely, that Omaha, home to famously frugal financier Warren Buffett, pictured left, comes in at no. 2 -- right after no. 1, New York City -- as a city where it's cheaper to rent than buy. Also on the list: Oklahoma City at no. 6 and Kansas City at no. 7. The results apparently also came as a surprise to Trulia's number crunchers.

Ken Shuman, spokesman at Trulia.com, told HousingWatch, "In Omaha, prices have always been steady and on the rise," but also managed to avoid the crash. Shuman points out that the "Buffett effect" makes for a fairly resilient economy there. Plus, Omaha and Kansas City never saw the glut of supply that flooded condo markets in Florida and Arizona.

On the flip side, the "cheaper to buy" list also yielded a few surprises, with Minneapolis and Arlington, Texas making it to the no.1 and no. 2 spots respectively.

Overly optimistic home builders helped fuel the housing bubble. Now the country's largest luxury homebuilder is back -- as overly optimistic as ever. Should buyers believe the hype?

In case you missed it: Toll Brothers reported that its losses shrank in the second quarter to $40.4 million or 24 cents a share, compared with $83.2 million, or 52 cent a share the previous year. In a sign of better times to come, net signed contracts rose 41 percent to 820 units. The contract cancellation rate also slowed, to 5.3 percent from 21.7 the year before. The news was good enough to push Toll Bros' shares up 3 percent.

But wait. Was this an anomalous blip due to the homebuyer tax credit, which expired April 30? (Nice coincidence: The company's fiscal third quarter ended April 30.) I thought everyone is worried that the credit simply jammed all the demand into the first four months of the year.

Not so, says Toll Brothers' CEO Robert Toll.

"It appears our business has finally emerged from the tunnel and into a bit of daylight," he says in the earnings release.
"May's activity suggests that for us the tax credit wasn't the determinative factor. Rather, we believe the past few months' activity has been driven by an increase in confidence among our buyers in their job security, their ability to sell their existing homes and general trends in home prices."

Toll is referring to activity in the first three weeks of May, which saw traffic from interested buyers rise 23 percent and non-binding reservations gain 11 percent.

That doesn't sound like a very solid argument.

If you were looking for good news about the housing market, you're in the wrong week. After yesterday's depressing data about April's rising inventories, the S&P Case Shiller Home Price Index today released its influential price index for March.

The highlight (or rather low point): Prices of single-family homes fell 0.5 percent from February, which is the sixth month-on-month drop after what felt like a mini-recovery last fall. This is especially worrisome since prices should have seen some kind of a boost from record low mortgage rates and Obama's home-buyer tax-credit which expired in April.

But they didn't.

So what does this mean for home buyers and sellers?

The English newspaper the Financial Times had an (inadvertently) quaint article on Friday about "a sales technique known as the open house."

Obviously written for a British audience, the article cracked me up with lines such as: "To succeed, the practice needs a pro-active realtor or vendor to whip up enthusiasm among prospective purchasers, who all inspect the property at the same time and – spurred on by rubbing shoulders with rival buyers – are encouraged to make above-market offers to make sure the home does not slip from their grasp."

Apparently, they don't hold open houses in the U.K. -- ever.

But why not? The Sunday open house is an American tradition, the first stop for many tentative home buyers on the way to making a real bid.

Should the lack of the practice in England make home buyers in this country reconsider their value?