March 31 loomed for months as the day when the U.S. Treasury would stop purchasing $1.25 trillion worth of mortgage-backed securities and effectively remove a major support to the fragile housing market.

(The Treasury began purchasing these securities in 2008 and increased their efforts in 2009, successfully pushing long-term mortgage rates below 5%.)

But now that the program has ended, economists interviewed by BUILDER suggest that builders—and others involved in the housing market—don’t need to panic. “This has been so well advertised,” says Scott J. Brown, chief economist for Raymond James & Associates in St. Petersburg, Fla. “Investors have had plenty of time to get used to it. The Fed has been gradually unwinding its liquidity programs. … This is just one more step toward getting back to equilibrium.”

Economic ‘equilibrium’ was certainly not the situation in 2008, when the Fed established the program. The financial markets were in extreme disorder, companies were failing, the government had taken over Fannie Mae and Freddie Mac, and consumers and businesses alike were slamming their wallets shut. 

Mortgage rates, as high as 6.2% in October 2008, according to Brown, didn’t help matters. But the Fed’s “extraordinary measure”—a $1.25 trillion MBS purchase program--lowering rates to the 4% and 5% range in 2008 and 2009. “When it started buying the securities, it had a huge impact,” Brown says. “But by now, the private sector demand has returned.”

Currently, rates for a 30-year fixed-rate loan stand at 5.08%, according to Freddie Mac’s weekly survey. That’s the second-highest level so far this year, but that remains low compared to historical standards.

The economists that spoke to BUILDER this week believe rates will rise, but not significantly, in the year to come. David Crowe, chief economist for the NAHB, forecasts that mortgage rates will rise20 basis points in 2010’s second quarter, to 5.4%. Patrick Newport, U.S. economist for IHS Global Insight, expects a relatively small increase of between 10 and 30 basis points. “I don’t think that’s a deal killer for man transactions,” he says.

Of course, it wouldn’t take much to topple today’s barely-still-standing housing market. “The housing market is still fragile, and a strong wind could knock it off its perch,” Crowe acknowledges. “But I believe an overall improvement in the general economic situation” will support the housing market, even as the federal housing tax credit deadline approaches at the end of this month.

Some number-watchers have suggested that the absence of the Fed might lead to more volatility in mortgage rates, but others say such movements would be small. “There could be. It’s been a pretty steady curve of demand from the Fed, and the private sector tends to be more fickle,” Brown says. “It will probably bounce around over time. One month it might be 20 basis points higher, another month it might be 20 basis points lower. But it’s only a difference of a half-point either way. … I think the bigger factor in housing is jobs.”

Crowe also suggest that mortgage rates are not the biggest factor on American’s home buying decisions at the moment. “I think the greater volatility is in the consumer and consumers’ attitudes,” he says.

Perhaps those sensibilities are finally swinging in builders’ direction, at least through April 30, when the tax credit ends. “I think the tax credit is starting to kick in, and it’s starting to show up in the numbers,” Newport asserts. “The Mortgage Bankers Association’ weekly mortgage application index this week is the biggest it’s been since the beginning of November, when it just collapsed” as Congress considered whether extend the credit, then scheduled to expire Nov. 30, 2009.

Alison Rice is senior editor, online, at BUILDER magazine.