Now may be the time to buy a house

If you have a good job and good credit, the next few months might be a sweet time to go house hunting. Then again, maybe not.

Fence-sitters take the risk that Congress may let a rich tax credit expire, and that interest rates may rise. So, let's walk through some factors for buyers and sellers to consider as they consider jumping in.

-Mortgage rates are blissfully low, and that may not last. The rate on a 30-year mortgage averaged 5 percent last week, according to Freddie Mac. Rates are low in part because the Federal Reserve has been buying up about $3 trillion in mortgage-backed securities and mortgage agency debt. The aim is to hold down interest rates and keep mortgages available. But the Fed is slowly removing that financial crutch as the economy improves. It has no plans to buy any more past March 30. The likely result is an uptick in rates.

Meanwhile, the recovering economy by itself should raise rates as the year goes on. Economists at the Mortgage Bankers Association expect to see a 6.1 percent rate by year end. Such a rise would add about $104 to the monthly payment on a $150,000 mortgage

-The home-buyer tax credit expires on April 30, and no one knows if Congress will renew it a second time. Expect a clash between the real estate lobby and fiscal conservatives worried about the $1.35 trillion federal deficit.

To qualify for the credit, you must sign a purchase contract by April 30 and close by July 1. First-time buyers get up to $8,000. "First-time" is defined as someone who hasn't owned a home in three years. Move-up buyers get up to $6,500 when they purchase a new primary residence. To get the credit, you have to have lived in the old home for at least five out of the last eight years. The credits start phasing out at $125,000 in adjusted gross income for singles and $225,000 for joint filers.

-There are indications that home prices are near a bottom in St. Louis and may actually be rising a bit. That statement is dicey, because conditions vary by neighborhood and the data can be tricky.

First American CoreLogic tracks real estate prices across the nation. In November, its housing price index for St. Louis was down 0.46 percent from a year before. That's an improvement from October, when it was down 2.8 percent.

Stats from the St. Louis Association of Realtors tell a happier story. For the last four months, median sale prices in St. Louis city and county have been above the level of a year before. That breaks a long pattern of falling prices.

Things might look different if you're a seller. Do you want to put your house on the market near the bottom of a price cycle? Homeowners who have a choice in the matter - those who can still pay their mortgages - are largely saying no.

Inventories of homes for sale are down about 10 percent from this time last year, and 30 percent from the mid-decade peak of the housing boom, says Kevin Cottrell, chief economist at Kelsey Cottrell Realty Group.

On the other hand, if you're planning to move up to something grander, you might find a bigger bargain when you buy. And that $6,500 tax credit could swing a close decision.

Home sales in St. Louis peaked in October and November, as buyers raced the expiration date of the original first-time homebuyer's credit. Congress later extended and expanded it.

That rush satisfied some pent-up demand, but real estate agents are hoping for another rush around April. "People will wait to the very last second," said Mike Travaglini, a vice president of Coldwell Banker Gundaker's office in south St. Louis County.

It's still a buyer's market. Letty DeMay, president of the St. Louis Association of Realtors, tells sellers to expect to wait 90 to 100 days for an offer. Meanwhile, sellers are dropping prices to entice buyers, she said.

The quickest sales come in the $150,000 and below range - prime territory for first-time buyers. But job losses, fear of job losses and tight credit may keep buyers scarce, despite the government giveaway.

Mortgage lenders have been tightening credit standards, which means fewer eligible buyers, says John Frank, president of Paramount Mortgage in Creve Coeur. Mo. "It's getting tighter and tighter," he said.

Lenders are insisting on credit scores of 640 to 660 for loans sold to Fannie Mae, Freddie Mac and 620 for FHA guaranteed loans. Those standards are higher than the federal agencies themselves insist on. FHA - which guarantees loans for people with low down-payments - has been raising its own insurance charges to borrowers and demanding higher premiums from people with poor credit scores.