Home prices showed promising gains in the second quarter, which could have helped millions of borrowers still saddled with negative equity.
During the three-month period, property values increased 1.8 percent from the previous quarter, according to a report from the Federal Housing Finance Agency. This was the biggest price gain experienced on this basis since the end of 2005.
"Although some housing markets are still facing significant challenges, house prices were quite strong in most areas in the second quarter," said FHFA principal economist Andrew Leventis.
The rapid appreciation may have been the result of fewer transactions on distressed properties, including foreclosed houses and short sales, Leventis added. In addition, a dwindling inventory made prospective buyers more competitive and may have also contributed to the gain.
With an estimated 11.2 million borrowers still upside down on their home loans, this development is a promising sign.
Out of the 25 largest metropolitan areas monitored by the agency, Miami experienced the most significant price increase from the first quarter, spiking 8.3 percent, the report said. In contrast, New York City saw a decline of 1.5 percent.