Home sales just in July jumped by 7.2% from a month earlier, the fastest rate in 10 years. This increase was the largest since 1999. It marked the fourth monthly rise in a row. Sales also were up by 5% from July 2008, showing the first gain from the year-earlier level since November 2005. For now, low prices and very attractive financing are enticing buyers. The buyers are back, and they are buying, but mainly the lowest-priced homes. Many potential seller of higher priced homes are waiting until the prices start to rebound. Sales have been aided by a federal tax credit of as much as $8,000 for first time buyers. This program will expire November 30th unless Congress extends it.

Another sign the housing market may be nearing its bottom is the home-price index which posted its first gain in nearly three years. Prices in 20 major metropolitan areas were up for the first time since 2006. However, prices were still down 15 percent in July from the same period last year. Many analysts agree that the recent cheer over a few bright spots must be weighted against a more complex range of other indicators. Home prices are still falling in many areas, with high unemployment and increasing number of foreclosures. We are not out of the woods yet. 

New home sales surged 9.6% percent in July, rising for the fourth straight month and beating all expectations.

Sales are now up more than 30% from the bottom in January this year, but are still off nearly 1 percent from the peak four years ago. As sales rise, that’s likely to make builders more confident about getting going on new projects, and that is likely to lead to more jobs in the construction industry. These are crucial elements of any sustainable recovery.

Somebody once said “I see a light at the end of the tunnel….just not sure if it is a real one or just a freight train”. Many experts warn that a recovery in housing is likely to be bumpy. Home prices could drop again as job losses drive foreclosures higher. Just in July, foreclosure-related sales accounted for estimated 30% of all transactions across U.S. This number is much higher in some markets, particularly in parts of Florida, Nevada Arizona and California. In the Las Vegas area in July, bank-owned properties accounted for 73% of all sales. Some 1.8 million homeowners are currently in foreclosures, and it is estimated that another 1 million will join the ranks in the near future. Distressed sales continue to push down prices. The median U.S. price in July for existing homes was $178,000, down 15% from a year earlier. 

In order to maintain a momentum the housing market may need another stimulus from the U.S. government. There is a new legislation in the Congress to extend the credit to  buyers and increase it to as much as $15,000 and make it available to all home buyers, not just first-timers. This legislation has full support of leaders in the Congress and the Obama administration. Everybody agrees that government is not going to endanger the fragile beginnings of a housing recovery by letting the credit expire.