WASHINGTON -- The recession appears to have come to an end as new reports show that the economy is on its way to a recovery.

But there are still dark clouds on the horizon, including huge government deficits.

Still, it's starting to look like a national episode of Extreme Makeover Home Edition -- the market that helped drive the U.S. into recession is showing signs of improvement.

New home sales rose nearly 10 percent last month. It's the fourth month in a row that saw gains better than analysts predicted.
         
"Homebuyers are entering the market and starting to purchase; and we are seeing it across the board; we are seeing it with increase in the home sales, we are seeing it lead into housing construction and overall improvement in the housing market," said Michelle Meyer, an economist with Barclay's Bank.
    
Those improvements coupled with new car buys, encouraged by the "Cash for Clunkers" program, are spurring growth on Wall Street as well, with stocks up 50 percent since the lows in March.

The news is welcomed, but there could be different problems looming in the future.

The government is pumping billions of new greenbacks into the market to dig the nation out of recession -- a move that could come back to hurt the U.S. dollar.

Just this week, the Obama administration announced the U.S. will run budget deficits totaling $9 trillion over the next decade.

That's $2 trillion more than what the White House previously projected.

"These numbers also tell us that it is extremely important ... that policymakers and Congress reduce the deficit, make it more sustainable, and avoid a fiscal trainwreck," former Federal Reserve Governor Laurence Meyers said.

That fiscal trainwreck could include a steep drop in the dollar in international markets -- and that in turn could mean inflation and higher interest rates here at home.