Home sales peaking out?

The government's housing tax credit is due to expire at the end of next month, which means lots of folks are in the market for real estate (and which might explain why I've seen so many people at open houses). But what happens after April 30? Some economists are urging Congress to extend the credits (they've already been extended once) because homebuyers have come to expect them. From the NYT:

Robert Shiller, a professor of economics at Yale and co-developer of the Standard & Poor's/Case-Shiller housing price index, is an early advocate. He thinks the credit was a bad idea that nevertheless the market cannot do without. "You don't make drug addicts go cold turkey," Mr. Shiller said. "The credit interferes with the market in an arbitrary way, but ending it now would be psychologically powerful. People will be in a bad mood about buying a house." He advocates phasing it out gradually.

The federal credits are worth up to $8,000. Then there are California tax credits worth $10,000 (spread out over three years). So there's quite an incentive to buy a house now - and quite a disincentive to buy later this year. That's becoming a recurrent theme when it comes to all government stimulus programs: Can the economy keep growing without life support?

Stan Humphries, the executive in charge of data and analytics at the housing site Zillow.com, said government support was crucial in breaking housing's acute fall in 2007 and 2008, but that it had also obscured the actual weakness of the market. "Many people got the sense last year that we had bottomed out and were going to rebound in a V-shaped recovery," he said.