Tax credits expire. Now what?

We all know the housing stimulus has worked and now it is over. Reports last week suggested that seven of 10 home buyers took advantage of the tax credit when purchasing homes. What is not known is how many of them would have bought homes anyway. As of Friday the Coeur d'Alene Multiple Listing Service showed 614 home sales pending.

We will be interested to watch the pace of home sales now that the opportunity for federal incentives has expired, but many pundits believe that the flurry of activity seen across the nation these last few weeks will take awhile to subside. This could be especially true in California, where a state sponsored stimulus of $10,000 began yesterday.

The New York Times, David Kocieniewski reported last week that "The Treasury Department estimates that the credits helped 1.8 million people buy homes, but critics reply that two-thirds of the $12.6 billion in credits spent through the end of February went to people who would have purchased a home anyway.

Sen. Johnny Isakson, a Republican from Georgia, who worked as a real estate practitioner for 30 years and pushed through the 2010 extension and expansion of the program, says: "It's true that a lot of people who got the credit might have bought without it, but they might have bought in 2012 or 2013. This got them to buy in 2009 and 2010, when we needed to shore things up."

Economist Mark Zandi at Moody's Economy.com agrees. "The tax credit helped to stanch the price declines, which had substantial benefit for the entire economy," he says. "The home is still the largest asset on most people's balance sheet, so when prices are falling, nothing works for most families. But now people can take a deep breath and think clearly again."

The reality is that there is more than stimulus money at play. Prices are well below the peak of 2006 and many buyers believe we are at the market's bottom. "In simple terms, housing is a bargain again, and buyers are responding," Michael D. Larson, a real estate and interest rate analyst at Weiss Research, wrote in a research note. "That is unambiguously good news for the market going forward."

Interest rates too, continue to be a factor. Many Americans have not let go of the idea that real estate is one of the best ways to build wealth. And with interest rates still at historic lows and wiggling just above 5 percent for 30-year loans, many buyers are choosing to act now rather than wait for rates to reach double digits. Don't believe we will see double digits? It has happened before. As the Fed raises rates will mortgages follow?

Although the Fed last week decided to keep bank rates low, some economists are saying that it's time for the Federal Reserve to raise rates.

Ken Rosen, chair of the University of California Fisher Center for Real Estate, says the financial crisis is over and short-term rates today should be 2 to 3 percent. By keeping rates so low, "We are encouraging asset bubbles in the stock market, bond markets and global real estate," Rosen says.

Whether mortgage rates climb or not, the credit has worked. Did it work for you?

Kim Cooper is the spokesman for the Coeur d'Alene Association of Realtors www.cdarealtors.com. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling 667-0664 with your questions or commentary.