As the end of the home buyer tax credit neared last month, we all argued whether or not the increase in sales and the relative price stabilization could survive on their own.

The first clues indicate the answer is: No.

One full week after the tax credit's expiration, mortgage applications fell 9.5 percent; this as mortgage interest rates dropped below 5 percent.

Sure, refis jumped, but that doesn't help us much with the currently bloated inventory of homes on the market.

Another report today from Trulia.com showed home sellers losing that little bit of ground they had recently gained in pricing. The number of properties on the market as of May 1st that saw at least one price cut rose 10 percent. (See Trulia's chart below.)

“With more than a year of the federal government’s involvement, we are now re-entering the free market system.

As we read just to the free market, we expect to hit turbulence in some markets,” says Pete Flint, Trulia co-founder and CEO. “We won’t know the true severity of the tax credit expiration until the conclusion of the peak home buying season in the summer months. Only then will we have a better sense if the U.S. housing market can stand on its own two feet.”

That "turbulence" translates into a whopping $25 billion in home equity obliterated from our nation's neighborhoods.

Either sellers in April were trying desperately to pull in those who would benefit from the tax credit, or they weren't seeing the boost from the tax credit they hoped, and therefore dropped prices accordingly.

Sellers may have thought they were at least edging toward the driver's seat again, but not so much.

Inventories are rising, thanks to foreclosures and the new hope that Spring afforded. Pent up selling demand surfaced, and unfortunately now much of it is sitting.

From one of our own CNBC producers, Andrea Mantia:

"I've been househunting for a few months now...we totally got caught up in the "tax credit frenzy"....thank God we took a deep breath and relaxed...EVERY SINGLE HOME we had our eye on dropped in price this week...and this is in Bergen Co (NJ) where prices weren't budging!"

I still believe the recovery will be far more local than the crash.

Some metro markets are seeing sales regain their footing, while others take a double dip.

On Friday we get the Treasury's monthly report card on its Home Affordable Modification Program (a.k.a. mortgage bailout).

That will give us an idea of where foreclosures and inventory are headed.

Stay tuned...

• More US Home Sellers Cut Prices as Tax Credit Ends
• Slideshow - Million Dollar Foreclosures

Questions?  Comments?