Home prices, including distressed sales, rose 2.6 percent in May and were up 12.2 percent from a year earlier, the largest annual growth since February 2006, according to CoreLogic, an analysis firm based in Irvine, Calif. Excluding short sales and other distressed properties, prices rose 2.3 percent in May and were up 11.6 percent from the year-earlier period.
"As we approach the halfway point of 2013, home prices continue to respond positively to the reductions in home inventory thus far," said Mark Fleming, CoreLogic's chief economist.
Annual price growth, including distressed properties, was seen in almost every state. Nevada, which was hit particularly hard when the bubble burst, saw the largest year-over-year price growth at 26 percent. The only two states with negative annual growth were Alabama, where prices declined 0.1 percent, and Delaware, where prices fell 0.6 percent.
Despite gains, national home prices, including distressed properties, remain 20.4 percent below a 2006 peak.
Economists say the housing market won't sustain such outsized gains. For one, rising prices induce more sellers to place their homes on the market, thereby increasing inventory. Also, builders are increasing construction.
"The rise in prices is a signal to the market to supply more housing. This is exactly what we expect to happen over the next several years," TD Economics analysts wrote in a recent research note.
TD analysts expect year-over-year growth in home prices to slow to below 4 percent next year.
In the meantime, there's concern that home prices are rising too quickly, and that some would-be buyers, such as first-time purchasers, aren't able to participate.
The recent gain in interest rates is another challenge, making it tougher for some to afford mortgage payments. For a median-priced single-family home, which costs about $200,000, borrowers who put down 20 percent face an increase of about $100 for their monthly mortgage payments because of the recent gain in rates, according to research from Goldman Sachs. While this marginal gain will make mortgages pricier, tight credit standards are an even greater hurdle for many borrowers, economists say.
CoreLogic's report echoes other recent housing-market data that point to a rebounding housing market. According to the Standard & Poor's/Case-Shiller index of 20 cities, home prices in April posted record monthly growth and the fastest year-over-year growth in seven years.