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Five years after the U.S. housing market collapsed, wiping out nearly $7 trillion in wealth, a recovery appears to be taking root. Existing home sales are rising — up 10.4 percent in July from a year ago and 2.3 percent from June, according to the National Association of Realtors.

The mean price of existing homes is also climbing — up 9 percent from last July in the biggest year-over-year gain since January 2006, just months before home prices peaked. The mean price now: $187,300.

There are also signs of recovery in the new home sales market. Luxury home builder Toll Brothers (TOL) today reported a 46 percent increase in third-quarter earnings as revenues rose 41 percent. Tomorrow the government will release its July new homes sales report, which economists surveyed by Bloomberg expect will show a 4 percent jump.

[Related: Invest in Your Home, Not Stocks: Chris Martenson]

"Everything is moving north for the housing market," Mark Zandi, chief economist of Moody's Analytics, told The Daily Ticker.

That's good news for the economy whose sluggish rebound has been blamed in large part on the suffering housing market.

"Housing has gone from a big negative to neutral" for the economy, Zandi says. "By this time next year it will be a plus and two years from now a big plus and one of the reasons the economy will be growing much more quickly than many think in 2014 and 2015."

In the meantime, the housing market is still "not normal," says Zandi. More than 13 million homeowners owe more on their mortgages than their homes are worth. Along with Nobel prize-winning economist Joseph Stiglitz , Zandi has developed a mass refinancing plan to help many of those homeowners, which in turn would help the housing market and the broader economy.

[Related: Flood of Foreclosures Could Cause Home Prices to Drop 20%: Gary Shilling]

It's targeted at homeowners holding mortgages with private lenders who are paying above-market rates and are current on their payments (the government has a program for those holding loans with Fannie Mae, Freddie Mac and the FHA). Under the plan, a government-financed trust would buy those mortgages charging about 2 percentage points more than Treasury rates. The government would use the extra income to cover administrative and default costs and homeowners would have three years to refinance. They would have more money to spend on other items, which would help the broader economy.

But is there any chance the government will adopt such a plan?

"It won't get through Congress if the economy and housing market continue to improve," says Zandi, but it is a viable option if the economy, including the housing market start to turn south again.

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