Existing home sales: Is the home-buyer tax credit failing?

What if government held a giveaway and no one showed up to claim the prize?

That's increasingly what's shaping up in the US housing market where, despite an expansion of tax credits, potential home buyers are staying put.

In February, existing home sales fell for a third straight month to an annual rate just above 5 million units, the National Association of Realtors (NAR) reported Tuesday. The 0.6 percent drop was in line with expectations, but disappointing nevertheless.

With few indications of robust economic growth, a second round of federal incentives doesn't seem to be kick-starting home sales the way last year's $8,000 tax credit for first-time home buyers did.

"The housing recovery is fragile at the moment,” NAR's chief economist, Lawrence Yun, said in a release. “The key test for a durable recovery comes in the next few months as the tax credit deadline approaches.”

Buyers have less than six weeks, April 30, to buy a home or get a binding sales contract for one in order to qualify for either an $8,000 tax credit (first-time home buyers) or a $6,500 credit (for repeat buyers).

What's keeping home buyers away? The continuing decline in jobs is sapping confidence. So is the prospect that prices will decline further in the face of a new slew of foreclosures that could approach the subprime-loan debacle.

This year and next, problem loans called option adjustable-rate mortgages will reach their reset dates. In these loans, homeowners actually see their mortgages increase because they pay less than the interest costs of their loan.

But as those mortgages reset, those owners will have to begin paying back principal as well as well as interest. If many of them can't, then look for another wave of foreclosures hitting the real estate market and further depressing prices.

"I remain concerned that we could quickly accumulate hundreds of billions of dollars of loan resets in the coming months, and in that case, would expect to see about 40 percent of those go delinquent," wrote John P. Hussman, who heads the Hussman Funds, in a recent weekly commentary.