(Originally posted May 26)

Pending home sales reached their highest level in the Puget Sound region since August 2006 as the federal home-buyers tax credit expired in April.

The question now is whether the housing market will lose its momentum with all that deadline-generated urgency missing.

Many experts say a decline is likely. They just can’t predict when.

“We won’t know until the end of the buying season, but I think it’s likely we’ll see a slowdown,” said land-use economist Matthew Gardner, principal of Gardner Economics. “We may have been stealing future demand, or pulling buyers in early.”

One positive sign in the short term is that the Federal Reserve said it doesn’t expect to raise interest rates any time soon, announcing Monday that it wants to wait for sure signs of economic stability first.

Gardner said he doesn’t see rates rising until fall.

Home values are also down since the economic collapse.

The median for a King County home in April was $340,000. That’s a drop of almost 3 percent from the same time last year, when the economy was less stable.

The drop in home values may not be over. Some experts forecast a double dip occurring because of looming foreclosures.

The combination of low costs and low interest rates would normally spark a feeding frenzy. But that isn’t likely to happen with credit being tight and unemployment levels remaining high at just below 10 percent for the state.

Still, most sellers remain confident that the market will be in good shape without the tax credit.

Jeff Smallwood is the vice president of Intracorp Marketing & Sales, one of the many home-marketing firms that banks are using to get assets off their books these days.

Smallwood says the federal tax benefit, while helpful, wasn’t as important as some think.

Intracorp, for example, took over sales of Stones Throw Townhomes in Bellevue on March 5, and the firm found buyers for all nine units in within a month. Only four of the buyers used the federal incentive.

Intracorp sold the homes without dropping prices any lower than they were when the bank handed over marketing responsibilities – an indication that prices may be stabilizing.

The Northwest Multiple Listing Service reports that the median home value increased slightly from March to April, another indication of price stabilization.

But it’s not just the incentive-driven sales surge that stopped values from slumping further. Banks have been doing their part to drive up demand by holding onto seized assets.

The result of all this: the four-county Puget Sound area now has a 3.5-month supply of homes ready to sell. A well-balanced market generally holds a six-month supply.

These conditions would normally result in a price hike, but tight credit and unemployment may once again keep things in check.

Gardner says “fence sitters” may also hinder sales figures.

“People are still waiting to buy, trying to cull the bottom,” he said.

Most of the recent sales activity has taken place with homes priced on the low end and, to an extent, on the high of the spectrum, with a gap in the middle.

That trend has provided a glimmer of hope for people like Todd Bennett, a Bellevue-based developer of single-family homes.

Bennett’s primary focus is affordable houses for the likes of immigrant professionals, young families and first-time homebuyers.

“Things are starting to return to normal on the single-family side of things,” he said.

At least that’s been the case so far.

Gardner says job growth will determine whether sales remain promising.

“I’m cautiously optimistic we’ll start creating jobs locally within the next month or so,” he said.