When many in the residential real estate industry lobbied last fall for an extension of the $8,000 first-time homebuyers federal tax credit until April 30, there was a good reason beyond just wanting to see the buying incentive continue.

May historically is among the industry's top-selling months, and agents and others knew they would need any advantage they could get to deal with the decline in buyer interest after the credit expired.

"The reason we wanted the tax credit to expire at the end of April was that May was traditionally our strongest month," said Dennis Melby of Long & Foster's Bethesda Gateway office. "And the spring market is traditionally our strongest market. So it made sense that if the stimulus had to end, it end at a very strong time for real estate."

Sure enough, the number of contracts for pending sales of previously owned homes dropped off in Maryland in May by 48 percent from April, a steeper decline than the national one of 33 percent, according to data from real estate information company Metropolitan Regional Information Systems.

"That was completely expected," said Kenneth Wenhold, director of the division of national housing data and consulting firm Metrostudy that includes Maryland.

But due to the backlog of signed contracts and other factors, the number of existing homes sold in Maryland rose in May by almost 10 percent to about 5,600 from April, according to the Maryland Association of Realtors. Nationally, the number of existing homes sold inched up by only 1 percent to 462,000 in May from April, according to the National Association of Realtors.

"Maryland has one of the healthier housing markets that we review," Wenhold said. An unemployment rate lower than the U.S. average and a relatively low level of overhanging housing inventory and vacant lots are among the factors that put the state's industry in better shape than most, he said.

Compared with May 2009 and May 2008, the industry's prospects are looking up. The number of homes sold in Maryland this May was up by 30 percent from May 2009 and 31 percent from May 2008. But it was still down from its pre-recession levels, including by 9 percent from May 2007 and 30 percent from May 2006.

New housing production in Maryland is also increasing. It was up 13 percent in the first quarter from the same period in 2009, according to a recent report by Metrostudy. That was the second straight quarter of gains.

Fewer signed contracts puts a question mark on the rest of the year, said Steve Meszaros, manager of the Long & Foster office that serves the area around Fort Meade and Baltimore-Washington International Thurgood Marshall Airport.

"I think the numbers will be down in June," said Meszaros, who is also board president of the Maryland Association of Realtors. "As to the rest of the year, one can hope."

Agents: Tax credit worked

The federal homebuyers tax program worked well to stimulate sales in a struggling economy, said Melby, vice president for Montgomery County with the Maryland Association of Realtors. New home contracts written peaked in April and have slowed in recent months, and those contracts will settle within the next few months, he said.

"Actual settlements from contracts written in April and earlier are peaking now, and will continue for a little longer," Melby said. "You could say the home is really sold when it settles and the new owners get the keys and the previous owners get the cash and move. That's settlement, and that will continue to rise into June."

Montgomery saw existing home sales rise by 23 percent in May from a year ago, while the median sales price declined by 2 percent.

The tax credit "definitely got people into the market who may not have been looking before," said Nicole Lapera-Holler, president of the Frederick County Association of Realtors. She knew at least two first-time buyers who were continuing their search for a home despite the program's expiration.

Working on closing those signed contracts has kept James M. Blaney, president of the Carroll County Association of Realtors and owner of Realty World Unlimited in Eldersburg, busy. First-time buyers who met the April 30 deadline for a signed contract had to close the transaction by Wednesday of this week to receive the $8,000 tax credit, though that is expected to be extended until Sept. 30 after congressional action this week.

"It's a shame to see it go," Blaney said of the tax credit. "It paid for itself."

Although sales are now "a little slow," Blaney has been dealing with homebuyers who are "more serious" and "not dependent on the tax credit," he said.

The market is split now, said Holler, an agent with Real Estate Teams in Frederick. Sales of homes in the $300,000 and below price range have leveled off, while buyers are still hesitant to purchase homes priced higher than $300,000, she said.

"I see multiple offers on homes that are $300,000 and below," Lapera-Holler said. Frederick and Washington counties' proximity to Washington, D.C., and decisions by people to move to those counties are contributing to the multiple offers, she said.

The median sales price in Frederick County dropped about 6 percent in the past year, though that rose slightly in May from April. Prices likely have not yet hit bottom, as foreclosures and short-sale homes are affecting the market, said Sue Marie Kalons, Lapera-Holler's fellow agent at Real Estate Teams.

"Until [foreclosures] move off the market, they will continue to have an impact," said Kalons, president of the Frederick County chapter of the Women's Council of Realtors.

Foreclosures continue to play a big role in Prince George's County, where home sales there were up 62 percent in May over a year ago.

In Prince George's, homes are selling at 92 percent of their list price, a sign that the market is stabilizing, said Andre Smith, managing partner of Horizon Signature Properties in Greenbelt. The median price in May was $199,000, some 11.5 percent below a year ago but 5 percent above April.

"Agents are doing a better job of pricing homes around what people are willing to pay," Smith said.

Dorchester County on the Eastern Shore has been hit hard by the tax credit's expiration, said Nancy Parks, an associate broker with Charles C. Powell Realtors in Cambridge. "Our market is different on the shore than the metropolitan area," she said, because of the Eastern Shore's higher unemployment rate.

Still, 31 homes sold in Dorchester in May, up from 21 a year ago.

Baltimore, where year-over-year home sales in May rose by 26 percent, also saw a bit of a slowdown in contracts signed after the tax credit expired, but June grew busier with more veteran homebuyers, said Paige Cosgrove, manager for the Federal Hill and Compton branches of the Boston Street Team.

"We're still in the D.C. corridor, so we're a big hub for government workers and corporate relocations," she said, adding that the Pentagon's Base Realignment and Closure program is also boosting residential sales.

The expected new jobs through BRAC gives Maryland a leg up over other states because success in the housing market depends heavily on job security, said Brenda Desjardins, spokeswoman for The Residences at Bulle Rocke in Havre de Grace, which involves seven builders.

The development already has 800 homes settled and has recently picked up two new builders, Liberty Homes and Williamsburg Homes.

"When we opened Bulle Rock, BRAC wasn't even on our radar. It's been a nice bonus to sales .... There's a huge surge of interest from job growth," Desjardins said.

A big change for builders has been the shift back to smaller, $300,000 homes, about 1,300 to 1,600 square feet, that buyers can later upgrade, she said. This was Bulle Rock's usual model before the housing bubble.

"The premise of Bulle Rock is that we didn't want to be the expensive homes on the hill," Desjardins said, adding that Bulle Rock also changed its homeowner association agreements to ensure all buyers live in the community for two years before renting out.

In Harford County, existing home sales rose by 44 percent in May to 268 from a year ago. The median price was $247,300.

BRAC is also expected to help boost sales in Prince George's during the next 18 months, said Yolanda Muckle of Long & Foster Real Estate in Mitchellville.

"BRAC is going to be so big," Muckle said, adding that she has already had Navy captains looking to buy and clients who are relocating to Joint Base Andrews in Camp Springs.

"Business has not slowed down. It's really picked up. People are putting houses on the market," she said.

Home sales in Washington County were up by 63 percent year-over-year in May. That's a trend that Frank Getz, vice president of the Pen-Mar Regional Association of Realtors, which covers Washington County along with Franklin and Fulton counties in Pennsylvania, hopes will continue.

"But we didn't get here overnight and it's going to take a while to clean it up," said Getz, who is also an agent with Caldwell Banker Innovations in Hagerstown.

Fewer days on market

In Montgomery County, average time on the market in May was only 51 days, according to data from real estate information company Metropolitan Regional Information Systems. That was less than half of what it was a year ago and the lowest monthly average in four years.

The increased activity in May translated to slightly higher sales prices in Maryland, though the 2 percent rise in the average median home sales price from April to $249,177 was lower than the national increase of 4 percent to $179,400. The Maryland average was still 6 percent below what it was a year ago, while the national average was up by 3 percent.

More sales have resulted in a drop in existing-home inventory in Maryland, which was at 45,207 in May, about 700 fewer than a year ago. The inventory of new homes was also smaller, Wenhold said.

"Looking forward, we expect to see starts and closings continue to rebound in 2010 as the resale market and the economy as a whole recovers," Wenhold said. "In Maryland, this will likely continue into late 2010, resulting in increased activity during the second half of the year."

With fewer homes on the market and settlements up, prices in the state should continue to gradually increase in the next year, Melby said. Mortgage interest rates will likely remain very low for some time, helping fuel buyers' interest, he said.

"The low interest rates are really getting people to buy," Muckle said.

The worst is probably over, Melby said.

"While it's true there's no bubble on the horizon, it's also true that the home-value crater is in the rear-view mirror," he said.

Consumer confidence is key, he said.

"I think the real estate market has shown consumers that there's still a market out there, that people can still buy and sell successfully," Melby said. "Other markets are now going to be responsible for confidence. The stock market, the European financial markets, energy markets and even the gulf spill are worrying people."