NEW YORK ( TheStreet) -- The U.S. needs another round of homebuyer tax credits to help stimulate the housing market and the economy, according to readers of TheStreet.

It's no secret the U.S. housing market has been under tremendous pressure for some time, and demand fell further after the springtime expiration of federal tax credits for homebuyers. Most analysts agree the situation is likely to get worse before it gets better.

We asked our readers if another round of homebuyer tax credits would help or hurt the economy. TheStreet overwhelmingly agreed that yes, another homebuyer tax credit would benefit the housing market and the entire economy. Out of 207 votes, 62.3% respondents voted yes while 37.7% vote no, viewing another tax credit as simply barking up the wrong tree.

The housing market saw sales ramp up in March and April as consumers rushed to take advantage of tax credits that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers. Following the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June. Data for July is expected to show a further drop in demand. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

>>4 Top Homebuilder Stocks: Life After the Tax Credit

The rush of homebuyers looking to take advantage of federal tax credits helped homebuilders like D.R. Horton ( DHI) and M.D.C. Holdings ( MDC) grow new home sales by strong double-digit percentages last quarter, primarily because the two homebuilders were willing to go out and build spec homes, explained Stifel Nicolaus analyst Michael R. Widner. In other words, they were willing to take the risk of building new home inventory without contracted buyers in place. The bet paid off when hoards of homebuyers showed up in April wanting to take advantage of the credits, and were willing to make a rushed deal to qualify for the incentives.

Beazer Homes ( BZH) recently reported a sharp drop in orders and backlog in the second quarter, and a cancellation rate that spiked 600 basis points to 29%.

>>Beazer Homes: Hard Times Ahead

"The weak order trends signal trouble for the fourth quarter," noted Vicki Bryan, senior high yield analyst at Gimme Credit. "Beazer will have to convert an unprecedented -- and unlikely -- 143% of its backlog just to deliver the same number of homes sold in the fourth quarter of 2009 (when sales were boosted by the November expiration of stimulus programs)."

Without the tax credits, even record-low and near-record-low home loan rates have not helped sustain a demand in the housing market, as many would have liked. The average rate for 30-year fixed-loan rates increased to 4.6% last week, from the record-low rate of 4.57% in the prior week, the Mortgage Bankers Association said Wednesday. The prior week's rate was the lowest on record since the MBA began tracking the data two decades ago.

Even so, Bryan does not support the idea of another tax credit; to the contrary, she was opposed to homebuyer tax credits in the first place. Still, she expects it will take years for demand in the housing market to rebound "to the hyper-inflated levels reached at the peak of the boom, levels now shown to have been inflated by 'creative' strategies that put too many people into too many homes they can't afford to keep."

High rates of foreclosures and joblessness, combined with a frustratingly tepid economic recovery, "could keep the lid on housing demand for years, which in turn could keep home inventory levels elevated," Bryan added. "That signals a protracted period of weak home prices, weak revenue and weak profitability for homebuilders."

Bryan expects D.R. Horton to outpace its peers as the entire sector continues to struggle. Horton reduced its debt in the recent quarter, and therefore its leverage, "to less egregious levels and cash on hand is nearly 40% of revenue," Bryan noted. "This leaves Horton better equipped than many of its peers to manage a protracted period of weakness in the new home market."

Builder Lennar ( LEN) "has some of the strongest credit metrics" among homebuilders. Even so, the analyst remained concerned that Lennar began to ramp up its spending on land and joint venture projects before restoring its cash flow from operations to a level of sustainability, and it has not reduced its leverage from historically inflated levels.

KB Home ( KBH) could face an even rougher road ahead than many of its peers, as it caters to entry-level homebuyers. Bryan added that "KB's bonds trade at levels that do not appear to capture the appropriate risk apparent in its credit profile."

The MBA said mortgage applications increased by 13% last week, though the bulk of the increase came from homeowners looking to refinance their existing home loans, rather than applying for new home purchase loans.

Refi applications accounted for 81.4% of all applications, up from a 78.1% share in the prior week. It was the highest refi share of mortgage applications since January of 2009.

Economists expect the National Association of Realtors to report next week that existing home sales fell 4.2% in July to a seasonally adjusted annual rate of 5.14 million, according to Briefing.com consensus estimates. Existing home sales fell 5.1% in June to a rate of 5.37 million units.

Sales of newly built homes in July are expected to rise 2.4% to a seasonally adjusted annual rate of 338,000, from 330,000 in June and a record-low rate of 267,000 units sold in May.

While any increase in the rate of home sales is seen as a good sign for the economy and housing market in general, the uptick in June home sales still represented the second-weakest month on record after May's depressed figures. It was also 76.3% lower than the 1.4 million-peak in July 2005, at the height of the housing bubble.

The Commerce Department estimated that 210,000 new homes were on the market nationwide at the end of June, the lowest level of inventory in more than 40 years. It would take 7.6 months to sell through that inventory at the most recently reported sales pace.

-- Reported by Miriam Marcus Reimer from New York.

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