Home prices increased 5 percent on an annual basis in September according to data released this morning by CoreLogic.  The CoreLogic Home Price Index (HPI) which includes sales of distressed homes, indicate that September had the largest price increase in over six years and represented the seventh month when annual prices increased.  September's annual increase, however, was 0.3 percent lower than the annual increase in August.

When distressed sales are excluded, home prices also increased on a year-over-year basis by 5 percent and increased month-over-month for the seventh consecutive month, increasing 0.5 percent compared to August.  

All but seven states experienced a year over year gain in September with the highest appreciation including distressed home sales in Arizona (18.7 percent), Idaho (13.1 percent), Nevada (11.0 percent), Hawaii (8.9 percent) and Utah (8.7 percent).  Arizona, Idaho, and Nevada were also among the top five states in price appreciation when distressed sales were excluded.  Montana and California rounded out the top five.

The state with the greatest depreciation, including distressed sales, was Rhode Island (-3.5 percent).  Illinois, New Jersey, Alabama, and Delaware followed, all with price depreciations under 3 percent.   Prices for non-distressed sales declined in only four states with Alabama (-3.1) having the only negative appreciation exceeding 2 percent.

The change in the national HPI from its peak in April 2006 was 17.0 percent including distressed sales and 20.4 percent excluding distressed sales.

The CoreLogic Pending HPI indicates that October 2012 home prices, including distressed sales, are expected to rise by 5.7 percent on a year-over-year basis from October 2011 and fall by 0.5 percent on a month-over-month basis from September 2012 as sales exhibit a seasonal slowdown going into the winter. Excluding distressed sales, October 2012 house prices are poised to rise 6.3 percent year-over-year from October 2011 and by 0.2 percent month-over-month from September 2012.

"Home price improvement nationally continues to outpace our expectations, growing five percent year-over-year in September, the best showing since July 2006," said Mark Fleming, chief economist for CoreLogic. "While prices on a month-over-month basis are declining, as expected in the housing off-season, most states are exhibiting price increases. Gains are particularly large in former housing bubble states and energy-industry concentrated states."

"Home prices are responding to better market fundamentals, such as reduced inventories and improved buyer demand," said Anand Nallathambi, president and CEO of CoreLogic. "So far this year, we're seeing clear signs of stabilization and improvement that show promise for a gradual recovery in the residential housing market."