Sales of existing U.S. homes shot higher in July marking their highest level in nearly two years as first-time buyers took advantage of historically low prices, favorable interest rates and tax credits from the government.

Home purchases rose 7.2% to a seasonally adjusted annual rate of 5.24 million—the most since August 2007—from a seasonally adjusted annual rate of 4.89 million in June, according to the National Association of Realtors (NAR).

The uptick in sales represents the biggest monthly gain for the total existing home sales series since 1999 and exceeded analysts’ expectations of an increase of 5.0 million. The median home price fell 15.1% to $178,400 in July as distressed properties continued to drag down the national average.

The latest data suggests that housing is stabilizing and may be poised for continued growth on the heels of one of the worst collapses in our nation’s history. “The housing market has decisively turned for the better,” said Lawrence Yun, NAR chief economist, in a prepared statement. “A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”

An NAR practitioner survey found that first-time buyers purchased 30% of homes in July and distressed homes accounted for 31% of the transactions.

Jeff Parker, managing director and portfolio manager at Oppenheimer Capital, believes the national housing crisis has evolved into a more cyclical slump. “Housing now suffers from a more normalized downturn, one driven by unemployment and wealth destruction,” he says, noting that the states that led the country into the crisis—California, Arizona and Florida—have rebounded and worked off a sizeable portion of inventory.

In the Northeast, existing home sales rose 13.4% to an annual rate of 930,000 in July. Existing home sales in the Midwest climbed 10.9% to an annual rate of 1.22 million whereas home sales in the South rose a more modest 7.1% to an annual pace of 1.95 million. However, the West saw existing home sales fall 1.7%.

Single-family homes increased 6.5% to a seasonally adjusted annual rate of 4.61 million in July from a pace of 4.33 million in June. Existing condominium and co-op sales jumped 12.5% to a seasonally adjusted annual rate of 630,000 units last month from 560,000 in the previous month.

Despite the surge in existing home sales in July more Americans are likely to lose their homes as companies continue to cut jobs. Indeed, a total of 360,149 properties received a default or auction notice or were seized in July, according to RealtyTrac, an online real estate data provider headquartered in Irvine, Calif. Reports show that one in 355 households were put on notice, representing the highest monthly rate in RealtyTrac records since January 2005.