The housing crunch, which began in 2007 and was the earliest sign that the U.S. economy might be headed for a recession, has hit many people hard. Families have defaulted on their home loans, and been forced to move out of their homes. The recession that followed the housing crunch only added insult to injury, as many folks found themselves out of work and out of a house. The good news, however, is that there are signs the housing crunch is over and that the markets may be stabilizing.

The $8,000 tax credit for first time home buyers has been a shot in the arm for the industry. It has helped to kick start the housing market. Sales for existing homes are rising, and from July to August of this year there was a rise of 7.2 percent in home sales. This was the largest month-to-month increase in home sales since 1999.

In addition, home prices seem to be starting to stabilize. The recent S&P/Case-Shiller U.S. National Home Price Index of 20 cities showed a quarterly increase for the first time in three years for the third quarter. In addition, the Federal Housing Finance Agency’s quarterly report showed purchase prices were down by less than 1% from the first quarter of the year.

On top of the $8,000 first time home buyer tax credit, there are other reasons that home purchases have increased. Interest rates are extremely low and, while not as low as they were in April when rates hit an all-time low, still below the psychologically-significant 5% rate. When you factor in home prices that have dropped by as much as 50% in some places, it makes a great market for home buyers. For the low end of the market, these numbers translate into multiple offers and occasionally bidding wars between buyers.

Many of the homes selling now tend to be lower-priced and starter homes. For the month of June, for example, the National Association of Realtors recorded a significant increase in home sales under $100,000 – to the tune of almost 40 percent. Even homes priced between $100,000 and $250,000 rose just over nine percent during June.

Home prices today are around the level they were at in 2003 in most places. There are some cities, such as Las Vegas and Detroit, that were hit pretty hard by the housing crisis. Prices in those cities have fallen by as much as 54 percent in Detroit and 45 percent in Las Vegas. These cities continued to struggle, with their values dropping this year still.

Nationwide, however, prices seem to be stabilizing. The Federal Housing Finance Agency shows that values of homes fell less than a percent between the first and second quarters of the year. This is good news, as the pace at which values are dropping seems to be slowing.