Short Supply Pushes Home Prices to Seven Year High

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A sale pending sign is posted in front of a home for sale in San Francisco, California.

Home prices continue to rise well beyond expectations, taking their biggest jump in April since February of 2006, when housing was booming.

Prices nationally increased 12.1 percent in April from a year ago, according to the latest reading from CoreLogic, a real estate data and analysis provider. This includes prices of distressed homes. On a month-over-month basis, prices rose 3.2 percent.

Even without distressed sales in the mixed, either short sales or foreclosures, home prices rose 11.9 percent. Prices nationally, including distressed sales, are still down over 22 percent from their peak in April of 2006.

"House price growth continues to surprise to the upside," said Dr. Mark Fleming, chief economist for CoreLogic. "Increasing demand for new and existing homes, coupled with low inventory, has created a virtuous cycle for price gains, most clearly seen in the Western states with year-over-year gains of 20 percent or more."

(Read More: Map: Tracking the US Real Estate Recovery)

The five states with the highest price appreciation were Nevada, up 24.6 percent, California, up 19.4 percent, Arizona, up 17.3 percent, Hawaii, up 17 percent and Oregon, up 15.5 percent, according to CoreLogic.

These states saw the highest price growth during the housing boom and the steepest drops during the housing bust. While the jumps today are high, prices are still well below their peaks in 2006 and 2007. Much of the price growth out West has been driven by investors in distressed properties, but as prices rise, some investors are moving out of the markets.

"Performances at the local level remained mixed when considering strength, sustainability and relative positions to 2006 prices. For example, Las Vegas' strong yearly gains represent a rebound from a severe correction rather than bubble-like price growth," said Alex Villacorta of Clear Capital, a research and analytics firm. "Some markets, like Cleveland, have yet to find a foothold in the recovery. Both Las Vegas and Cleveland are great reminders that granularity in home price trends remains key."

(Read More: Home Price Gains Go to Double Digits)

While the home price recovery appears to be on solid ground, the picture is still mixed on a local level. Price growth is being driven by a severe lack of supply of for-sale homes. This is due to a drop in foreclosures as well as the continuing effects of negative and near-negative equity. Thirteen million borrowers are still underwater on their mortgages and 9 million more likely don't have enough equity to afford the cost of moving, according to a recent report from Zillow.

(Read More: Record High New Home Prices Have Room to Grow)

—By CNBC's Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

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