The report released by the National Association of Realtors was the first bit of good news the housing market has seen in some time.  Home sales rose for the first time in seven months in the month of February.  Home prices are still falling though, which is a cause for concern.  The median sales price is down 8.2% from a year ago.

While this gives a glimpse that the housing market may soon be bottoming out, it doesn’t mean that sub prime crisis is over yet by a long shot.  All this really does at the moment is give the stock market a reason to rally for another day until the next bit of bad news comes along.

The problems with the banking sector are still there.  Only a week removed from the near bankruptcy of Bear Stearns, the financial sector is still gripped in a major credit crisis.

Many homeowners are still stuck with unwieldy mortgages that are worth more than the price of their homes, so the foreclosure risk remains.  So far, write downs from the sub prime collapse are estimated around $200 billion but many experts are predicting that figure could rise to as high as $500 billion before all is said and done.

While it appears that the Fed is willing to use any tool necessary to instill liquidity in the market, the fact remains that banks have tightened their lending standards considerably.  While the Fed has been slashing interest rates left and right, mortgage rates still remain abnormally high.

So while the slump in the housing market has caused the current troubles in the financial markets, it’s looking more and more likely that the financial markets will constrain a possible rebound in the housing market.