By BREANN PETRO

Despite tougher lending practices and an uncertain economy, local experts predict the housing market will fare better this year than last.

While the first-time homebuyer tax incentive stimulated a surge in real estate activity in early 2010, the effects were not lasting, according to John Sylvia, chief economist at Wells Fargo.

"It was only a temporary measure; it didn't really provide a setting to move the economy on a long-term basis," he said of the tax credit, which ended April 30.

Real estate attorney Amy Vigneron of Cohen and Lombardo P.C., meanwhile, said she saw residential purchases drop off slightly following the end of the incentive program.

"I think it was a good program, but I just don't think the economy improved enough to give people the positive financial backing to go forward," Vigneron said.

Real estate experts, who noted the incentive was extremely popular among those looking for houses in the $80,000 to $140,000 range, said they saw sales slow after the first half of 2010.

"The urgency (to buy) was not there with the stimulus money being gone," said Bob Rigby, associate real estate broker at Realty USA. "People had the attitude of ‘What's the government going to do for us now?' We are a country of people who feel entitled."

Though the stimulus money was gone, the incentive of historically low interest rates remained.

"Although mortgage interest rates remained low for most of 2010, rates hit record lows in October," said Nicholas L. Buscaglia, group vice president and regional mortgage manager at M&T Bank.

He cited the best rates as slightly more than 4 percent.

Rates rose to more than 5 percent in December - still low in comparison to historical costs. But there were other factors keeping people out of the housing market, including job layoffs, concern about the global economy, rising health-care costs and diminished consumer confidence. That's according to John Leonardi, CEO of the Buffalo Niagara Association of Realtors. He said year-to-date pending home sales and closings in November were down 9 percent across Western New York.

"It was not the worst year ever," he noted.

According to Vigneron, another factor discouraging people from entering the housing market is more restrictive underwriting standards.

"Banks are being more responsible, and people are being more responsible," said Vigneron, who predicts the housing market will stay status quo in 2011.

While lenders are advertising low rates, not many borrowers may have the credit score to qualify for the best rates, she said. In addition to raising the credit history criteria needed to borrow, mortgage lenders now require higher down payments and more documentation to verify the borrower's income, expenses and assets.

Though borrowing money in general may be more difficult, there is at least one change to the process that's for the better, she added. Lenders are now required to use a new Good Faith Estimate Form that details exactly how much a mortgage is going to cost - not just the interest rate, but all the fees and charges required to close the loan. Estimates can be easily compared with the actual costs at the time of closing, assuring that people are not overcharged. Vigneron said these new rules help borrowers make a smarter decision.

Sylvia, of Wells Fargo, likens the more stringent lending standards to going on a diet after a holiday eating binge.

"They lent out a lot of money to a lot of people; now trying to pull that back is like going on a diet. Now you have to eat far less," he said. "You know there's a tougher workout going forward."

With less people able to qualify for mortgages, the current inventory of homes will remain on the market longer - a trend Sylvia expects to see for the next three to five years nationwide. While he says rates likely will remain low, getting enough people to borrow at better credit standards will prove difficult in 2011.

But the picture is different locally.

Unlike most of the country, Western New Yorfk is one of a handful of markets in which property values have increased, according to Leonardi, who said they were up 7 percent year-to-date in November. He sees this as a reflection of the quality of life while also pointing to Verizon, Yahoo, Geico and the Buffalo Niagara Medical Campus, which are bringing jobs to the area. Both he and Rigby agree that home sales will increase in the first part of 2011. Also, strong 2010 stock market returns and holiday purchases bode well for the mortgage and housing industry.

Buscaglia of M&T Bank, however, said the housing, lending and employment pictures remain unclear.

"Despite the uncertain direction of future interest rates, the government is committed to tackling these lingering issues with the hopes that interest rates will once again drop to 2010 levels," he said.

And though mortgage interest rates are expected to remain comparatively low, Leonardi predicted they will begin increasing to stave off inflation.

Rigby, meanwhile, sais that increasing rates may create a renewed sense of urgency for individuals looking to buy or refinance a home in the coming months. He also noted that some people do not realize it has become more difficult to obtain a mortgage until they are involved in the process.

Those looking to refinance are faced with the same challenge: more hoops to jump through in order to qualify for low rates, as well as more conservative appraisals.

However, Sylvia said there are deals out there for individuals with a solid credit history who can get a good appraisal on their property.

"It's almost like two different worlds out there for people trying to refinance," he said, noting that for those with a strong financial history and steady job, rates are as low as 4 percent. "Refinancing works for better-credit people."

Breann Petro is a freelance writer from West Seneca and former editor of the West Seneca Bee newspaper.