How could (NASDAQ:HOMS) have blown it? I find myself asking that question every three months, when it dawns on me that the leading online real estate specialist missed out on the mother of all housing booms.

Sure, the company has gone through legal improprieties and falsified financials galore. In fact, the past few quarters may make you wonder whether the words "litigation settlement" has been permanently tattooed to the company's financial statements. But when rock-bottom interest rates were jacking up home prices, shouldn't the company have been able to cash in? You'd think it could have set aside its problems long enough to take advantage of its status as a popular online destination for folks looking to shell out for a new home.

Well, it never quite turned out that way. This past quarter's report of $0.04 a share in earnings would have been great if it were real. In reality, the company produced yet another operating loss. The earnings were simply the result of a one-time charge -- in this case, a rare favorable one related to an asset sale.

This is not a pretty situation. Revenue was up just 5% -- a sobering contrast to diluted shares outstanding that shot up by 29%. The stock has lost more than half of its value since peaking in April 2004.

While the company has been busy shaking off its troubles, earnings reports are still coming in mostly solid for builders like Lennar (NYSE:LEN) and D.R. Horton (NYSE:DHI), which have decent order backlogs. Meanwhile, though, homebuilder Pulte Homes (NYSE:PHM) has already lowered prices in the once-hot Las Vegas market, and the Fed clearly intends to raise interest rates, with a good possibility that rates will hit 7% and cool off the housing market.

If that happens, Homestore won't be able to put up much of a fight.

Is Homestore where your heart is?

Longtime Fool contributor Rick Munarriz isn't looking to move from his home, but that never stops him from killing time by checking out some online real estate sites. He does now own any of the stocks mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.