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Home Prices Up at Fastest Pace Since '06

Home prices posted their biggest year-over-year increase since the summer of 2006, according to a new report out today, yet another sign of a housing market clawing back from a deep recession.

The Standard & Poor's/Case-Shiller home price index climbed 8.1 percent in January compared with a year earlier and prices rose in all 20 cities tracked by the index. Even New York, where prices had been lower in recent months, showed an increase.

Phoenix, Las Vegas and San Francisco posted the highest annual increases; they were also among the cities hard hit by the housing bust.

Home prices have been moving higher partly because there's a lack of properties for sale in many areas, leading to stiffer competition among buyers. However, according to recent report from the National Association of Realtors, the inventory of homes for sale is growing a bit, showing a market that is slowly returning to normal.

Home prices across the country are still well below their peak at the height of the housing bubble in August 2006. They are only back to where they were in August 2003. So many who bought homes at the height of the bubble may still owe more on their mortgages than their homes are worth.

There are still 10.4 million such "underwater" homes in the country, according to CoreLogic. But as home prices tick up, more homes move into positive equity. By late last year 200,000 additional homes returned to positive equity.

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