The U.S. House of Representatives voted Thursday to extend the first-time homebuyer tax credit through 2010 as well as offer a credit to more seasoned homebuyers. The vote was 403-to-12 and was widely expected to pass.

The current tax credit has been in effect since January as a piece of President Obama’s economic stimulus plan and has allowed first-time homebuyers an $8,000 tax credit. It has been credited with jump starting the fallen national housing market, resulting in increases in existing homes over the past several months. Many feared that if it were allowed to expire as it was set to on December 1, that the real estate market would see a dramatic drop again.

Here’s how the extension works:

Buyers must be entered into a mortgage contract for a home purchase by midnight on April 30, 2010 and must close on their sale by midnight of June 30, 2010. First-time homebuyers will still receive $8,000 in tax credits, while previous homeowners (specifically those who have owned their current homes for at least five years) will be allowed $6,500 in credits.

The purchased homes must be principal residences and may not exceed $800,000 in price. Those with an income of $145,000 or more ($245,000 if married filing jointly) are not eligible for the credit and those with incomes between $125,000 and $145,00 would receive a reduced credit.

Many hope that this extension will get things moving in not only the lower-priced end of housing but in the middle-priced range as well. Lawrence Yun, chief economist for the National Association of Realtors believes that it might stem potential buyers’ fears about falling home prices.

“Once the consumer fear factor disappears, then housing can move into a sustainable recovery,’’ Yun said. “I think we will be there by the middle of next year.’’

I like how Patti Ketcham put it, a Tallahassee real estate firm owner, as quoted in the Boston Globe. “It’s huge. I think it’s going to have a big impact. I hope I’m right. Golly, I hope I’m right.”

The Obama administration and the homebuyer’s tax credit went a long way to stabilizing the housing market, with the Standard and Poor’s Supercomposite Homebuilding Index increasing 30% in 2009. The Federal officials can buy up to $1.25 trillion in mortgage-backed securities with continued support for the housing markets. At this time, they have bought about $860 billion in the mortgage-backed securities program, and $129 billion (out of $200 billion program) in U.S agency bonds.

As the economy improves though, The Federal Reserve will begin to slow down its purchase of mortgage securities. The Federal Open Market Committee said after meeting in Washington:

“The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010.”

For the first time since August of 2008, policy makers announced that the economy is in fact improving, but that they are committed to keep the interest rates low for an extended period – perhaps into the spring season.

The market is still tough, but there are signs of definite improvement. According to the National Association of Realtors, existing home sales rose 7.2% in July from June, which is the highest level increase in about two years. The Federal Housing Finance Agency index indicates that home prices rose for the third month in a row, with a 0.3% increase in July from June.

Instead of shocking the market by shutting down all government assistance programs at once, the Fed will ease out their purchases and are hoping that other buyers will start increasing their activity to avoid a potential increase in mortgage rates. When the Fed’s stop purchasing mortgage-backed securities, it’s possible that mortgage rates will see a 0.5 to 1% increase.

The median price of home sales in 20 of the nation’s major cities fell by an average of 0.6 percent in April, according to Standard & Poor’s Case-Shiller index, showing great improvement over March when they slid by 2.2 percent. Yet plenty of people are not so sure this is a sign of economic recovery on the whole.

As Steve Blitz writes on his economic markets blog:

“Recession definitely impacts home prices… But in each cycle, home prices recover before the economy does… Because the perception of recovery lags reality, this means that home prices begin to recover long before consumers believe the recession has ended and certainly before the unemployment rate starts to turn down… My forecast is for home prices to begin [to] move higher in the third quarter and to finish 2009 with prices about 11% below year-end 2008 levels.”

And home prices did start to rise in several of the tracked metro areas. Dallas, Denver, and Cleveland all experienced price gains of 1 percent or more from March.

But even S&P chairman David Blitzer is cautious about announcing this as a good sign.

“While one month’s data cannot determine if a turnaround has begun; it seems that some stabilization may be appearing in some of the regions. We are entering the seasonally strong period in the housing market, so it will take some time to determine if a recovery is really here,” he said.

Blitzer attributed the slowing of price declines to a rise in consumer confidence and rallies in the stock market.  So what’s it all mean? Now may be the best time to get off the fence and buy a home before prices continue to rise. Then again, these number can easily fluctuate based on unemployment and other factors, so maybe you can wait until you actually start seeing price gains in a majority of the metro areas.

Home prices will continue to sink another 11 percent in the coming months, resulting in a 36 percent overall decrease in home values, according to report released Monday from Moody’s Economy.com, but the silver lining is that they will bottom out by the end of the year.

“Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight,” chief economist Mark Zandi said in a statement today. “Presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year.”

To date, the 381 metropolitan areas included in the Case-Shiller home price index have experienced a 25 percent decrease on average in home values. Before the end of 2009, Moody’s predicts that 62 percent of those areas will see double-digit declines before the correction is through.

The house prices in Southeast Florida is likely to be hit hardest during the coming year with values in Naples, Florida forecasted to fall 70.1 percent from 2005 to the last quarter of 2010. Moody’s predicts that the next biggest losses with be in Merced, California where prices will probably drop 69.6 percent.

Moody’s predictions are all based on assumptions that the U.S. government will aggressively legislate ways to stimulate the economy. “Policymakers have not yet been able to break the downward spiral that has developed among the sinking housing market, job losses, frozen credit markets, and rising foreclosures,” Zandi said.

Yet, even if the newest bailout package comes together and consumers profit from an expansion of the first-time home buyer tax credit, Moody’s warns that the housing market recovery after 2009 will not not bring growth back to its pre-downturn rate until the end of 2010.

The rate of mortgage loan delinquency in the U.S. increased to 3.96 percent in third quarter of 2008,  the seventh consecutive quarterly rise  and a 12 percent increase from the second quarter of this year, according to a survey from credit research company TransUnion.

“As expected, the mortgage sector continued to experience increases in the delinquency rate due to worsening economic conditions in both the labor and financial markets,” said Keith Carson, a senior consultant in TransUnion’s financial services group in a release Monday.

According to the TransUnion survey, a mortgage is delinquent if a borrower is 60 days late or more on the payments. Delinquencies are a traditional predictor of mortgage foreclosures and with the current rate up 54 percent from the same quarter last year, more heartache in the housing market is likely to follow.

Florida led the nation in the highest rate of delinquency at 7.82 percent. Nevada was a close second with a rate of 7.71 percent. The state was with the lowest delinquency pace was North Dakota at 1.35 percent. South Dakota and Montana also had relatively few late mortgages with rates of 1.6 percent and 1.71 percent, respectively.

While West Virginia was the only state to experience a decline in its delinquency rate during the third quarter (the rate fell by 0.39 percent), the District of Colombia saw the greatest increase with a 42.7 percent jump from the previous quarter.

“Our forecasting models predict that the national 60-day mortgage delinquency rate among mortgage borrowers will continue to rise in the fourth quarter of 2008 and throughout 2009, with the 2008 delinquency rates ending at 4.66 percent and 2009 rates possibly reaching 7 percent or greater,” said Carson.

There is some hope on the horizon, however. “Depending on the severity of the capital markets crisis, the ultimate outcome of the decline in the U.S. auto industry and the timing of a recovery in retail sales,” he commented, “we see the possibility of a flattening of mortgage delinquencies as the economy begins to stabilize and some sectors of the country begin to improve in the second quarter of 2010.”