The stimulus package of which the homebuyer credit was part was signed into law on Feb. 17. Panic pervaded. The Dow Jones stock average was 7,600 and plunging. The economy was shedding jobs at a rate of 700,000 a month. Many expected the wholesale seizure by Washington of Citigroup, Bank of America and numerous other institutions.
Extraordinary times call for extraordinary measures. That's what the homebuyer credit was: a massive subsidy from renters and people who already owned houses directed into the pockets of home sellers and first-time buyers.
But the emergency is over. That doesn't mean the country has recovered - far from it. There are nearly 15 million unemployed Americans, each with his or her own story of hardship and frustration. But the fear that preceded the creation of the stimulus - the concern that 15 million unemployed would become 30 million - has abated.
The Dow has risen 2,000 points since then. Monthly job losses have been cut by two-thirds. Production, savings and consumer confidence are up. Unemployment is still rising, but that's what normally happens at the beginning of recoveries.
A separate report - this one from the Realtors - showed that home sales dipped for August. When the August Case-Shiller dispatch shows up a month from now, it may indicate that the price recovery faltered. But if you're worried that an expiration of the first-time buyer credit would make the housing business stimulus-free, don't.
Mortgage rates continue to benefit from the Federal Reserve's bond buying and are near all-time lows. The Federal Housing Administration is guaranteeing billions in new mortgages that it probably shouldn't.
The Realtors' Housing Affordability Index - which accounts for rates, family income and prices - is near all-time highs. After all, home prices in many markets are down 40 percent or more from their peaks a few years ago. The homebuyer tax credit - which basically amounts to 5 percent or 10 percent discount on a starter house - looks puny by comparison.
The inventory of unsold homes has plunged to a level that would take buyers 8.5 months to exhaust - down from nearly 12 months when gloom prevailed. In normal times there is a 6-month supply of homes for sale. As the supply gets smaller, prices should stabilize no matter what Congress does.
Thousands of people would be buying houses even without the credit. Why don't we find out how many there are by letting it expire?
Then, if prices and sales deteriorate again next year, Congress can revive it. But let's test reality first before adding billions more to the federal deficit.
