Home prices are going up, up, up, but it's not a bubble just yet.
The surge in housing prices over the past year may have some homebuyers wondering if the market has gotten ahead of itself. Rising interest rates aside, however, prices in most parts of the country appear to have plenty of room to move higher if the wider economic recovery remains intact.
The latest data on price gains Thursday showed home prices advanced 7.7 percent in the year through June, a rise that has fed on itself as fence-sitters move to buy before prices rise further.
West Coast housing markets have seen the biggest gains. The Federal Housing Finance Agency report showed prices were 17 percent higher in June than a year earlier in the Pacific area, which includes California and Washington.
House prices jumped 11 percent in the Mountain region, which included Nevada and Arizona. The Middle Atlantic region—New York, New Jersey and Pennsylvania—had the smallest increase, at 2.5 percent.
The government data echo other reports of healthy gains in home sales and prices. The National Association of Realtors said Wednesday that the median price of a previously owned home jumped 13.7 percent for the year ended in July to $213,500.
A recent rise in mortgage rates is also spurring buyers to lock in rates before they climb higher.
"When you start to see interest rates rise, people are going to want to jump in," said Beth Ann Bovino, deputy chief economist at Standard & Poor's. "All those people on the fence come back into the market. But that's a good thing."
Higher borrowing costs could eventually price some buyers out of the market and slow the market. Sales of new single-family homes fell sharply in July, to their lowest level in nine months, the Commerce Department reported Friday. Sales dropped 13.4 percent, to an annual rate of 394,000 units, and the government also revised sharply lower its estimate for home sales in June.
(Read more: Stocks little changed after plunge in new home sales)