I attended a seminar sponsored by the Federal Reserve in May at which a couple of speakers urged that, while the nation's financial system remains in disarray, Americans consider alternatives to buying houses.

One alternative mentioned was renting with an option to buy, which Stephanie Selden of Philadelphia VIP, a group that provides legal counseling for low-income people, countered was prone to scams, leaving "many of our clients with nothing."

Another was renting until things get better. Fannie Mae chief economist Doug Duncan said a recent survey showed that "public awareness of mortgage problems" had made current renters wary of buying now, and that "most believe it will be harder to buy in the future."

The suggestion that we find alternatives to buying won't sit well with real estate agents and builders. Though the tax credits made a dent in the supply, there are still a lot of houses for sale - and still not many buyers.

Traditionally, summer is a slow time, and the tax credits pushed a lot of people who might have bought houses now to buy them in late winter and spring instead.

In an e-mail, reader Doug Waymer of Chalfont went as far as to suggest that the credits were "a costly taxpayer handout to folks who were already going to buy a home," resulting in "no improvement to the housing market."

The tax credits simply stole from future sales, Waymer wrote, "and with the expiration, sellers now need to lower prices." He added he had "pleaded with my sister and brother-in-law to close the deal on their Connecticut house sale April 30."

Though his kin were fine with the price they were getting, they didn't want to settle by the required deadline. "They lost their buyer and are having to paint the exterior, as well as drop their price again," he said.

Waymer makes a good point, especially when you consider that even though fixed mortgage interest rates remain below 5 percent and home prices have been reduced by short sales and foreclosures, there are relatively few real buyers out there.

In the last month or so, mortgage rates have dropped almost half a percentage point on a conventional 30-year loan.

Long & Foster vice president Art Herling says half a percent may not seem like much, but it can have a huge impact on the ability to buy a home.

At 5.375 percent, a $300,000 30-year conventional mortgage obtained in March would have a monthly payment of $1,679.91. At today's average rate of 4.875 percent, that same mortgage would cost $1,587.62 - a saving of almost $93 a month. "You would save $33,224 over the life of the loan," Herling said, and "that is a much bigger saving than an $8,000 tax credit."

In its outlook for housing published June 14, the Joint Center for Housing Studies at Harvard wasn't encouraging.

"Many factors are still weighing heavily on the market," said the center's director, Nicolas P. Retsinas. "Elevated vacancy rates, record foreclosures, the expiration of the tax credit, and high unemployment are all causes for concern."

Despite falling home prices, loan modifications, and softening rents, the downturn has not lowered the number of households spending half or more of their income on housing, which stood at 18.6 million in 2008. Instead, the share of those with severe housing-cost burdens climbed to a new height.

So, should you buy or rent?

The American Bankers Association recommends that you think about these things:

  • The monthly costs, and whether you can afford them. Mortgage payments under 30 percent of your monthly income is a good rule of thumb.
  • What the total rent or mortgage payments, plus other credit obligations, will be. No more than 40 percent of monthly income is advised.
  • Whether you have the credit score to qualify for a good interest rate.
  • The cost of taxes, monthly maintenance, or other fees.
  • The number of years you plan to live in the house.
Inquirer real estate writer Alan J. Heavens is the author of "Remodeling on the Money" (Kaplan Publishing). His home improvement column appears Fridays in Home & Design. Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.