KALISPELL - Merna Terry and her husband Ron build small affordable houses, often for first-time homebuyers, and this week she was one day away from laying off three crew members.

But then a house sold, and then another, "and those sales happened specifically because of the tax credit."

For months now, the federal government has offered an $8,000 tax credit for first-time homebuyers, a program that was set to expire.

On Friday, word came from Washington, D.C., that the credits would be extended through April. In addition, a $6,500 "move up" credit will be offered to existing homeowners looking to move into a new house.

"The extension is huge," Terry said. "For us, we really need it to make it through the winter. I have three guys going to work on Monday because that program exists."

Others in the industry were likewise pleased with the news, saying tax credit programs have been - and will be - key to recovering the country's flagging real estate market.

"The credits have definitely boosted sales, especially in the lower range," said Karen Haarr, who sells real estate at Montana Brokers Inc., Realtors.

Her partner, Teri Bjornrud, estimates that a full two-thirds of her buyers in recent months have participated in the federal program.

Most of the sales, Bjornrud said, have been at the lower end of the price range, because that's where first-time buyers usually enter the market. In "normal" times, she said, sales at the bottom "trickle up," as sellers move from smaller houses to larger houses, each sale pushing another sale on up the price scale.

But that hasn't necessarily been the case in recent months, agents said.

"People have lost their jobs, and they're moving out of the area, or just getting out of homeownership altogether," said Larry Wakefield, owner-broker at Properties Northwest. "There's been a lot of distress sales and foreclosures, and that's limited the trickle up."

He is encouraged by the $6,500 "move up" credit though, and believes it could help move markets both upward and downward.

Janeen Lembke, at Seller Direct, agreed.

Sellers, she said, now have a motivation to become buyers, and the "move up" credit - combined with attractive prices and low interest rates - "should get things moving again."

Some, Wakefield said, will move into larger homes, and the impacts will trickle up. And many, especially recently retired Baby Boomers, will move into smaller homes, and the impacts will trickle down.

In that way, Terry said, even her affordable homebuilding business could benefit from the "move up" program.

"Some people will move up," she said, "but some will move over, and some will move down, downsizing into a more manageable house."

Terry and her husband built 14 homes in the last year, and a full half went to buyers using the first-time tax credit. So it's no surprise she's a fan of the program.

"But it can't just go on and on forever," she said. "I think April is a pretty good cutoff date."

She would have preferred a gradual end to the credits - fazing them out slowly over time - but says she's still "hopeful that by next spring the market will be able to move forward on its own, without the tax credits."

Already, agents and builders alike are reporting a modest uptick in business, "especially since late August," Haarr said. "All of a sudden, it's just popped. The last couple of weeks, actually, have been really busy."

And that, most agree, is a direct result of the tax programs. Under the previous round of credits, deals had to be closed by Nov. 30 to qualify, "and people were really responding to that deadline," Bjornrud said. She believes buyers also are moving now in anticipation of possible interest rate hikes.

And Friday's news of the extension, Haarr said, "isn't going to hurt anything, that's for sure. People are going to take advantage of it while they can, and that's really going to help our winter sales."

To qualify for the $8,000 tax credit, participants must be first-time homebuyers, with household income of less than $225,000, and they must be buying a home valued at less than $800,000.

To qualify for the $6,500 "move up" credit, seller-buyers must have lived in their home for five of the last eight years, and must be buying a home that will be their primary residence.

The Montana Building Industry Association praised Montana's congressional delegation for making the programs possible, noting in particular the efforts of Sen. Max Baucus, D-Mont., and Rep. Denny Rehberg, R-Mont.

"They have both proven to be great friends of small business and affordable housing," said Dustin Steward, MBIA executive director.

"The extension and expansion of the first-time homebuyer tax credit is a win-win for Montana builders and families," said Baucus, who helped draft and sponsor the bill. He called the program an "economic tool working in communities across Montana."

"It's certainly working here," Terry said. "I can go to the job site today and show you people at work who wouldn't be. This program literally saved their jobs."