Report: Home Prices Up Most Since 2006

NEW YORK (TheStreet) -- How's this for a cheerful headline: Pleasant Surprises and Hopeful Futures.

That's the title of a report from CoreLogic (CLGX), a firm that tracks the housing market. It said Monday that home prices increased 7.5% last year, the largest increase since 2006. While other surveys have found prices rising, CoreLogic's data are particularly valuable because the firm tracks repeat sales of the same homes, avoiding the distortion in surveys that don't adjust when trends favor large homes over small ones or vice versa.

CoreLogic predicts 2013 will be a good year too: "Rising home prices will continue to slowly release pent-up supply as under-equitied borrowers are unlocked and opportunistic sellers begin to provide relief to tight inventories."

Key to the 2012 results were the year's relatively sound economic growth, improvements in the job market and a decline in the number of "distressed" home sales -- those going for fire-sale prices because of foreclosure or other problems. The agreement between the states and the mortgage servicers over how to handle foreclosures made it easier to clear away foreclosed properties.

CoreLogix says negative equity -- when homeowners owe more than their homes are worth -- made it impossible for many "underwater" homeowners to sell -- helping prevent an excess of supply that could have depressed prices further. At the same time, investors demand for homes to use as rentals helped push prices up.

"A good way to characterize 2012 is as a year in recovery, but not one in which the country has actually recovered," CoreLogic says. "Recovery will likely continue in 2013, though we should not expect a full recovery by year-end."

Among the concerns is "whether spending cuts and layoffs by federal, state and local governments will slow the recovery," CoreLogic says.

The total number of homes sold rose 6% in 2012, to 4.2 million, the first increase since 2005. With the sale of distressed homes removed, the figure rises to an 11% gain over 2011 sales.

The sales of "real estate owned" homes, a category made up mainly of distressed sales, dropped by more than 20%

Meanwhile, short sales rose by 20%. Those are sales in which the lender agrees to accept less than the homeowner owes. An increase in short sales means lenders are working to get bad loans behind them -- another sign the market is improving.

CoreLogic says the delinquency rate, or share of borrowers behind in their payments, has also fallen dramatically.

Economic troubles could reverse the trend, but for now that does not seem terribly likely. For one thing, the country avoided the fiscal cliff crisis. And as prices rise, more and more homeowners are likely to find it possible to trade up to bigger, more expensive homes. To do that, they must be able to sell their current homes for enough to cover their debt and provide money for the next down payment and closing costs.

So barring a new financial or economic crisis, the future looks promising.