Huge Increase in July Home Sales Signals More Optimism for Economy

The housing market in the U.S. is still fragile and it will likely take several more years to undo the damage that was done during the housing bubble-and-burst. But there are some signs that the market is gaining strength with the new July sales numbers. It was the largest percentage increase in at least ten years and the overall sales volume was at its highest point since August of 2007. Of course, a major factor at work in those numbers is the First-time Home Buyer Credit that the federal government introduced as a means of stimulating growth in the housing market.

That credit is scheduled to expire in November of this year, which means that home buyers need to act quickly if they're going to be able to qualify for the credit. And even amidst the uptick in home purchases, the median value of homes in the U.S. continues to plummet and is down 15% from last year. The median value of U.S. homes being purchased is $178,400, which is down from $210,100 at this time last year.

The home price reduction is a necessary piece of the correction process and will - eventually - lead to a healthier and more stable housing market overall. With new lending procedures and, hopefully, some painful lessons learned in regards to sub-prime lending, the housing market can slowly begin to return to sound fundamental footing.

One of the issues that remains, however, is that the housing market cannot and should not return to the growth period that occurred from roughly 2002 to 2006. That period of growth was unnatural and unsustainable and helped lead to the broader financial collapse we've all experienced. As long as future projections are not based on ever returning to that level of growth, then the housing sector, at least, should be in good shape for years to come.