What will happen when the housing credit expires?

Today fed chairman Ben Bernanke said that the recession is over.  That's likely true for most production work, and I'd bet that employment will start going up within a few months.  However, the second wave of the housing crises will probably be in full swing by early next year.

For those of you who are not aware, there is currently an $8,000 no strings attached credit for new buyers of homes.  The credit is available to any buyer within 6-8 weeks of the purchase.  While we can leave the short term merits of this policy to another discussion, one thing is for sure: it is likely that a good deal of houses being bought now are partially financed by this credit.  Using this credit as a down payment of sorts, someone's monthly payments will probably only go down by a hundred bucks, if that.  However most buyers likely using this credit to furnish a new house, or just blow it on other things.  Regardless, it is one thing that definitely motivates people to buy a house.  I know this, because I planned on using it before I abandoned my home search several months ago.

The housing credit is set to expire on Dec 1.  If this is not renewed, it means that people will need to be under contract by mid-October to safely get it (all contract contingencies aside).  

So what happens if this credit is allowed to expire (which I think it should)?  For most buyers, it will mean that they will either stop looking, or start looking at cheaper houses.  For sellers, it means that their house is at least priced about $8,000 too much, but likely much more, since buyers are probably not using this credit as a down payment.  At any rate, there is going to be a rush to buy every house on the market within the next month, and then housing activity is likely to drop substantially.  Will this induce congress to introduce an even larger tax credit next year?  Maybe $15,000?  We shall see.