Home price jump at 7-year high

Year-over-year rise of 12.2% in May a sign of strong recovery.

U.S. home prices jumped 12.2 percent in May from a year ago, the most in seven years. The increase suggests the housing recovery is strengthening.

Real estate data provider CoreLogic said Tuesday that home prices rose from a year ago in 48 states. They fell only in Delaware and Alabama. And low the peak reached in April 2006, according to CoreLogic.

Sales of previously occupied homes topped the 5 million mark in May for the first time in 3 ½ years. And the proportion of those sales that were “distressed” was at the lowest level in more than four years for the second straight month. Distressed home sales include foreclosures and short sales. A short sale is when a home sells for less than what is owed on the mortgage.

Home sales are expected to increase in the coming months. That’s because the number of people who signed contracts to buy homes rose in June to the highest level since December 2006. There’s generally a one- to two-month lag between a signed contract and a completed sale.

One worry is that higher mortgage rates could slow the housing recovery. Still, rates remain low by historical standards. And increases in rates could boost home sales. That’s’ because many Americans may act to lock in the lower rates before they rise further.

A survey by the University of Michigan released last week found more Americans believe it is a good time to buy a home.