Take a good hard look at the second graph and tell me what you think is going to happen to housing prices over the next few months. A normal market has about six months of supply available. During the bubble, the months of supply generally ran closer to four months, and prices were soaring. It was not until inventories climbed above the six month mark that prices started to fall.

The really collapsed as the months of supply moved into the double digits. The extensive government support for the housing market -- including the tax credit, but also the Fed buying up to $1.25 trillion in mortgage paper to artificially depress mortgage rates -- helped boost sales and bring the months of supply back down. Now that support is over, and the months of supply far exceed the worst we saw during the heart of the bust (Note: the graph is not updated to include the September data).

The tax credit was not a very effective means of stimulus, but it did help prop up prices, and that is a pretty important accomplishment, even if it proves to be ephemeral. The credit cost the government about $30 billion. A large part of that money went to people who would have bought anyway, but perhaps would have done so in July or August rather than May or June. To the extent it rewarded people for doing what they would have done anyway, it did nothing to stimulate the economy.

Also, turnover of existing houses really does not do a lot to improve the economy. It is the building of new houses that generates economic activity. And it is not just about the profits of D.R. Horton ( DHI) ( DHI - Analyst Report ). A used house being sold does not generate more sales of lumber by International Paper ( IP) ( IP - Analyst Report ) or any of the building products produced by Berkshire Hathaway ( BRK.B) ( BRK.B - Analyst Report ) or Masco ( MAS) ( MAS - Analyst Report ). It does not put carpenters and roofers to work. New homes do.