We must remember that existing home sales were coming off a four month streak of increases, so a one month dip is nothing to cause too much concern. Yesterday we learned that mortgage applications rose last week to their highest levels since May 22.

One thing that we will have to keep an eye on over the upcoming months is the impact that will be felt when the government's $8,000 incentive program comes to an end. The current $8,000 incentive is only available on homes that are closed on by November 30, so the deadline is rapidly approaching. How strong the housing market performs once the incentive program comes to an end will be a major factor in determining just how strong the legs are for the housing recovery.

Despite the dip, sales are higher than where they were this time last year. During July existing home sales were 3.4 percent higher than last July, another positive sign. Nationwide, sales are up 14 percent from their January lows, so there is some recovery taking place, and indicators are good that we will continue to see improved strength, but for now it is just too early to tell how much and how quickly the market will rebound.

For now the market is being helped by foreclosures and sales by home owners in distress. These sales accounted for around 30% of existing home sales in the month. Foreclosures are expected to continue rising, and with unemployment continuing to rise it would make sense that sales of homes in the upper end of the housing market will continue to be under pressure.

The average price for existing homes sold in July was $177,700. This market a 12.5 percent dip from the $203,200 national average for existing homes sold during July of last year.

I would love to say that we have seen the worst already, and I do believe that the July dip is nothing to worry about, but there are still too many reasons to worry for now. We will have to see foreclosures start to fall, and unemployment numbers improve before the housing market can make a full recovery in my opinion.

What are your thoughts on the housing market? Have we seen the bottom, or should we expect to see things reverse back to the downside in the months ahead?