U.S. home prices jumped 12.2 percent in May compared with a year ago, the biggest annual gain since March 2006. The increase shows the housing recovery is strengthening.
The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday also surged 2.4 percent in May from April. The month-over-month gain nearly matched the 2.6 percent increase in April from March - the highest on record.
The price increases were widespread. All 20 cities showed gains in May from April and compared with a year ago.
Prices in Dallas and Denver reached the highest level on records dating back to 2000. That marks the first time since the housing bust that any city has reached an all-time high.
Home values are rising as more people are bidding on a scarce supply of houses for sale. Steady price increases, along with stable job gains and historically low mortgage rates, have in turn encouraged more Americans to buy homes.
One concern is that higher mortgage rates could slow home sales. But many economists say rates remain low by historical standards and would need to rise much faster to halt the momentum.
Svenja Gudell, senior economist at Zillow, a home price data provider, said a big reason for the recent price gains is that foreclosed homes make up a smaller proportion of overall sales. Foreclosed homes are usually sold by banks at fire-sale prices.
"Typical home values have appreciated at roughly half this pace for the past several months, which is still very robust," Gudell said.
Gudell said higher mortgage rates and a likely increase in the number of homes for sale in the coming months should slow the pace of price gains and stabilize the housing market.
The index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The May figures are the latest available. They are not adjusted for seasonal variations, so the monthly gains reflect more buying activity over the summer.
Despite the recent gains, home prices are still about 25 percent below the peaks they reached in July 2006. That's a key reason the supply of homes for sale remains low, as many homeowners are waiting to recoup their losses before putting their houses on the market.
Dallas and Denver, the two cities that reached record highs, were not hit hard by the housing bust and therefore didn't experience the sharp price swings like cities in Arizona, Nevada, California and Florida.
In Dallas, prices fell only 11.2 percent from their previous peak in June 2007 through February 2009. That's far less than Las Vegas, where prices plummeted by more than half. Since bottoming out, home prices in Dallas have increased nearly 14 percent.
In Denver, prices dropped 14.3 percent from August 2006 until they also hit bottom in February 2009. Since then, they have risen 17.3 percent.
The biggest price gains are occurring in many of the states that experienced the worst housing bust.
Prices jumped 24.5 percent in San Francisco in May from a year earlier, the largest increase. Las Vegas reported the next biggest gain at 23.3 percent, followed by Phoenix at 20.6 percent. All three remain well below their peak prices. [Click here for more on the new housing numbers.]
Are you an Arizona homeowner with a house underwater? Are you a recent homeowner who is gaining value on a recently purchased home? We want to hear from you. Share your stories in the comments section below.
Copyright 2013 Associated Press. All rights reserved. CBS 5 (KPHO Broadcasting Corporation) contributed to this report.
Tuesday, July 29 2014 10:11 AM EDT2014-07-29 14:11:15 GMT
Shocking video of a young man who was beaten and robbed in broad daylight has gone viral, and it's all part of a disturbing trend. A handicapped man was beaten and robbed on the street while the wholeMore >
Shocking video of a young man who was beaten and robbed in broad daylight has gone viral, and it's all part of a disturbing trend.More >