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Distressed Home Sales Bolster Recovering Housing Market

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U.S. home prices rose at the beginning of the year as more homeowners turned to distressed sales rather than foreclosure, in another sign the recovery in the housing market is gaining traction, data from CoreLogic showed on Tuesday.

CoreLogic's home price index rose 0.7 percent in January from the previous month and jumped 9.7 percent compared to a year ago. It was the biggest yearly increase since April 2006 and the 11th month in a row that prices have increased.

(Read More: Where Have I Seen That House?!)

Excluding distressed sales, prices rose 1.8 percent on the month and were up 9 percent from the previous year. Distressed sales include homes that are in danger of foreclosure or have already been seized by lenders and are often sold at a significantly reduced price.

A report last week showed that distressed home sales continue to make up a significant share of the overall housing market.

Foreclosure-related sales made up 21 percent of all U.S. sales in 2012 and short sales, when the home is sold for less than the value of the mortgage, made up 22 percent, according to research firm RealtyTrac.

(Read More: Distressed Homes Still Drive Sales)

All but two states — Delaware and Illinois — racked up yearly gains.

The report forecast prices would fall by 0.3 percent in February as part of a typical winter slowdown. Still, for the year they are seen up 9.7 percent.

"With these gains, the housing market is poised to enter the spring selling season on a sound footing," Mark Fleming, chief economist at CoreLogic, said in a statement.

Of the top 100 statistical areas measured by population, 92 showed year-over-year gains, up from 87 in December.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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