By: Diana Olick
CNBC Real Estate Reporter

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Home prices are rising faster than expected so far this year, or are they?

Prices nationwide in July rose 3.8 percent year-over-year, according to the latest reading from CoreLogic. This includes prices of distressed properties and is the biggest annual jump since August of 2006.

This is also the fifth consecutive month that home prices have increased both year-over-year and month-to-month.

“The housing market continues its positive trajectory with significant price gains in July, and our expectation of a further increase [4.6 percent] in August,” notes CoreLogic’s chief economist Mark Fleming in a press release. “While the pace of growth is moderating as we transition to the off-season for home buying, we expect a positive gain in price levels for the full year.

Home prices nationally are in real recovery, but the factors pushing those numbers may not be real organic strength in the housing market, but rather stimulus and simple comparisons. This summer the market saw a huge drop in the number of distressed homes for sale, as banks tried to modify more borrowers or opted for short sales, which is when the home is sold for less than the value of the mortgage. Short sales often garner higher prices than bank-owned (REO) sales. Investors, especially big money bulk buyers, flooded the market, pushing prices up on the higher end and causing a severe drop in supplies. (Read More: Pending Home Sales Beat Expectations in July)

Now to comparison, which reveals a striking truth in home prices. They are definitely higher, but not nearly as high as we think. We have to remember that 2011 was what some have deemed the “hangover year” from the government’s home buyer tax credit. The tax credit offered first-time home buyers in 2009 and the first half of 2010 an $8000 credit. That may not sound like much, but the median price of a home in 2009 was $172,500 according to the National Association of Realtors. That means the credit was a full 5 percent of the price of a home…or a full quarter of a 20 percent down payment.

The home buyer tax credit juiced home sales and prices by a lot, but prices then dropped precipitously in 2011. Home prices dropped a full 4 percent from 2010 to 2011 on both the CoreLogic and the Realtors’ index. The S&P/Case Shiller national home price index was down 5 percent from Q2 2010 to Q2 2011. In addition to recovery from a hangover, this year mortgage rates are a full percentage point lower than they were in July of 2011, which creates much more purchasing power/stimulus, thereby skewing the comparison even more. (For More: Home Prices on the Rise)

“Bottom line, when you un-adjust, normalize, handicap, overlay stimulus periods, and analyze — based on the massive increase in rates driven purchase power, the distressed mix shift positive skew, pulled-forward effect, and the overwhelmingly more positive sentiment — the June year-over-year Case-Shiller indices only up 0.1 percent and 0.5 percent respectively and July CoreLogic Home Price Index only up 3.8 percent can be viewed as ‘net’ house price depreciation…and should be very disappointing for those looking for ‘escape velocity’ and a ‘durable recovery,’” says housing analyst Mark Hanson.

We are comparing home prices now to the double dip in home prices that we saw last year. On S&P/Case Shiller, the national home price index in Q2 2012 is actually down, just under 1 percent from Q2 2009, which was just when the tax credit began but hadn’t fully affected price readings yet. DataQuick shows home median prices at the end of July up 7 percent from a year ago, but up just 4.6 percent from three years ago.

None of this is to say that we are not seeing recovery in housing. It is just important to keep this recovery in perspective, especially when mortgage rates and distressed homes still play such a large role in these monthly numbers. Any shift in either of those categories could have a material effect on the numbers that we watch so closely each month and which play such a critical role in overall housing sentiment.