The Homebuyers' Tax Credit program, which offered an $8,000 tax credit to first-time homebuyers and a $6,500 credit to repeat buyers, worked exactly as intended. Buyers rushed to beat the April 30 contract deadline, and historical norms for contract activity were tossed out the window. There's no doubt the stimulus worked - but was it good for the market?

We looked at trends in new contract activity for homes priced less than $750,000 - the category most attractive to those using the credit - during the last 11 years. As one would expect, every year there has been a substantial increase in contract activity in March and April compared to January and February, as the market shakes off the winter doldrums. For the ten years spanning 2000-2009, the average increase in activity was almost 41%. This year, however, contract activity doubled. While there's no way to be sure that buyers who rushed to beat the deadline would have purchased a home anyway, the credit certainly moved them to action. And their rush to buy in the early spring was felt later on. Historically, contract activity in May and June is generally a bit better than March and April. During the last ten years, there has been an average increase of about 5% in contract activity. (2006 and 2007 were notable exceptions as the market was really in decline.) This year, contract activity plunged by almost 30% in May and June. There can be no doubt that the stimulus shifted demand, creating a much more robust early spring market - and a much softer late spring.

So, was the tax credit a good thing? If the intention was to shake things up and get buyers off the fence, the policy worked - but only as long as it was in place. It didn't fundamentally alter the market, and the absence of the stimulus has kept some would-be buyers on the sidelines. In the short run, it probably was good, but the net effect over the course of the year has been close to zero.

Much as we hate to say it, it's possible that the impact might even be negative in the long run. There are some in Congress, correctly concerned about the health of the housing market, who think that a renewal and extension of the homebuyers' tax credit is in order. But the prospect of a return of the credit may actually inhibit sales, as would-be home purchasers await the next gift from Capitol Hill. It's time for the market to seek its own level. With mortgage interest rates at their lowest level since the Eisenhower Administration, buyers should be returning to the marketplace for market reasons. We'll see if they do.