Yolanda and Angel Valentin soon will own a two-bedroom home in Salisbury Township. As first-time home buyers, whose deal is expected to close at the end of March, they'll qualify for an $8,000 tax credit that was part of the $787 billion economic stimulus package signed last week.

"It's amazing," said Yolanda Valentin, who works in event ticket sales and as a housekeeper. "To get $8,000 nowadays, it's a good opportunity that will help us a lot. We can put it into the home or save it."

The credit -- available to first-time home buyers who make purchases between Jan. 1 and Nov. 30 -- will clearly benefit those like the Valentins.

What remains to be seen, however, is whether the credit will be enough to boost sales and prop up prices in the sagging housing market.

Real estate agents, who make money on commission when homes sell, are bullish about the potential effects of the credit. They hope it will be a counterweight to the mounting joblessness and ailing stock market that have made consumers skittish about taking on such big-ticket purchases as homes.

"Now is the time to buy. We've been trying to push that message for several months," said Ryan Conrad, government affairs director with the Lehigh Valley Association of Realtors. "Inventory is up, prices have come down a bit. If buyers were on the fence, this is an additional incentive to get them off the fence and into the market."

But some financial experts doubt the credit will provide a bounce since many first-time home buyers still could have trouble getting credit or may not want to buy homes until the economy shows signs of improvement.

Additionally, the incentive is not likely to boost sales at the high end of the real estate market. Sales volume in the Lehigh Valley is weakest for homes priced at $400,000 and above, which first-time buyers are unlikely to afford and few existing homeowners would want to acquire during shaky economic times, they say.

"In and of itself, the tax credit will not do much," said Stephen Thode, a finance professor and director of the Murray H. Goodman Center for Real Estate Studies at Lehigh University. "You'll have to see a turnaround in the jobs outlook and the overall economy for this to have an impact, and by that time, who needs it?"

Do you qualify?

First-time home buyers who close on their purchases between Jan. 1 and Nov. 30 qualify for the credit, worth up to 10 percent of the purchase price of the home with a maximum of $8,000. Most Lehigh Valley homes sell for more than $80,000, so most first-time buyers would qualify for the full credit.

The credit begins phasing out for singles earning more than $75,000 annually and couples earning more than $150,000.

Anyone who has not owned a home as a primary residence in the past three years qualifies as a first-time buyer.

The credit was a let-down for home builders, who lobbied Congress for a $15,000 tax credit for any buyer. But for first-time home buyers, it is better than a previous $7,500 tax credit available for those who purchased homes between April 8 and the end of 2008. That tax credit has to be paid back, so it is essentially a no-interest loan from the government. The new credit does not have to be paid back.

The National Association of Realtors estimates the tax credit will spur an additional 300,000 home purchases this year. First-time buyers bought 2.2 million new and existing homes last year, according to the association, which represented about 41 percent of all U.S. home sales.

Getting first-time buyers into the market creates a ripple effect throughout the housing market because the sellers are likely to buy new houses, real estate agents say.

"If first-time buyers come back into the marketplace to take advantage of this program before it ends, they may drive multiple transactions," said Loren Keim , president of Century 21 Keim Realtors in Allentown. "Theoretically, one first-time buyer can drive the sale of two, three or more homes."

Consumer confidence

For many homeowners, their house is their biggest asset. So the health of a housing market affects more than those who are buying and selling homes. It influences the entire economy through consumer confidence. Homeowners spend more freely when they perceive their wealth is growing, and they are inclined to cut back when they see their wealth diminish, even if their incomes remain stable, economists say.

Additionally, declining home values drain home equity that can be tapped for big-ticket purchases such as cars and home renovation projects.

The Lehigh Valley housing market is holding up better than the nation. But, it could still use a boost.

The market has seen two consecutive years of price declines, which represent an abrupt turnaround from the go-go price gains earlier in the decade. The average price of a home sold in 2008 in Lehigh and Northampton counties was $222,000, down 2.6 percent from the 2006 average, according to the Lehigh Valley Association of Realtors.

The price slip has been marginal, but the pace of erosion has intensified in recent months, as sales volume continues to drop and the inventory of homes for sale grows.

The average home price in December was $209,000, down 7.1 percent from the same month a year earlier, according to the association. The 342 sales reported in the month represented a 16.2 percent drop from the previous year. And, homes are lingering on the market. The average home sold in December was on the market for 78 days, up from 55 days a year earlier.

Economists expect further price erosion this year in response to the large inventory and job market unrest.

There are several factors that favor prospective buyers right now. There is a robust inventory of homes for sale, and buyers are in a strong negotiating position. Interest rates remain low. And the tax credit, for those who qualify, can provide a cushion in case of uncertainties.

But there are other factors that could keep people from buying. The Valley's unemployment rate continues to climb -- it hit a 15-year high of 7.1 percent in December -- which fosters concerns about income stability. Buyers need better credit than in previous years to get approved for loans, and many buyers need at least 3.5 percent down to qualify for mortgages backed by the Federal Housing Administration. And falling prices can create concerns about buying into a declining market.

Dave Lobach, president of Embassy Bank, said he doesn't think the tax credit will be adequate to reverse the decline.

"We should give a larger tax credit for a longer period of time to first-time home buyers and other home buyers," Lobach said. "We need to establish a base on housing, establish a floor on housing."

But real estate agents say the credit has piqued the interest of prospective buyers.

More interest

Alan Bosch, a sales agent with Prudential Patt, White Real Estate, said a recent open house he hosted drew about 15 people, which he said is good for the winter. Earlier open houses drew only two or three people, he said.

"With the $8,000 out there as a stimulus, that should certainly get some people off the fence," he said.

Karina Johnson and Joe Crosson are among Bosch's clients. They made an offer on a Bethlehem home Monday, and if the deal closes, they look forward to receiving the credit.

"I think it's great," said Johnson, a nurses' helper with Lehigh Valley Hospital. "Even though we're not getting it as soon as we buy it, we can look forward to it next year in case something happens with the house."

spencer.soper@mcall.com

610-820-6694

Morning Call reporter Scott Kraus and the Associated Press contributed to this story.

WHO'S ELIGIBLE?

First-time home buyers get a tax credit worth 10 percent of the purchase price of the home, up to a maximum of $8,000.

Those who buy between Jan. 1 and Nov. 30 qualify for the credit on their 2009 taxes.

Anyone who has not owned a home as their primary residence in the past three years qualifies as a first-time home buyer.