For the first time since the housing recovery started, four of the five indicators measured in Trulia's Housing Barometer have rebounded at least halfway, the company reported this week.
However, the last—and arguably most important—measure, employment among young adults, continues to lag.
In its latest barometer report, Trulia says new construction starts, existing-home sales and delinquency and foreclosure rates have all come closer to normalizing over the last quarter, with delinquency and foreclosure levels making the biggest strides, climbing to 74 percent "back to normal" from 63 percent in the last report.
"For the foreclosure crisis, the light at the end of the tunnel is getting brighter," said Trulia chief economist Jed Kolko.
Also improving is Trulia's measure of home prices compared to fundamentals. In its most recent Bubble Watch analysis, the company reported prices nationwide were 3 percent undervalued compared to 15 percent undervalued during the worst of the bust.
As home price increases moderate to a more sustainable pace, Trulia expects to see prices come to a level more in line with fundamentals by the last quarter of 2014 or the first quarter of 2015.
One factor still hampering the recovery, however, is the unemployment rate among Millennials—a key group for household formation and first-time homeownership.
Looking at a three-month moving average of data from the Bureau of Labor Statistics (BLS), Trulia found only 75.6 percent of adults between the ages of 25 and 34 are employed, bringing that statistic just 35 percent of the way back to normal, representing a step back from last quarter's report.
With first-time homebuyers still missing from the recovery picture and investors losing interest, Kolko says that employment number is critical. "Because young adults need jobs in order to move out of their parents' homes, form their own households, and eventually become homeowners, the housing recovery depends on Millennials getting jobs," he said.
Until Millennials can save up enough to afford down payments and mortgage costs, Kolko says apartment construction and renter household formation is the clearest sign of recovery as young adults feel more comfortable striking out on their own in rental units.