NEW YORK (Reuters) - Home prices racked up their biggest annual gain in more than seven years in April as the recovery in the sector picked up traction, a report from CoreLogic showed on Tuesday.

CoreLogic's home price index rose 3.2 percent from March and surged 12.1 percent compared to April a year ago, the biggest year-over-year price gain since February 2006.

Prices have been gaining for over a year as the housing market turned a corner, helped by low interest rates, a pick up in sales and less available supply.

Excluding distressed sales, prices were up 3 percent from the month before and 11.9 percent from a year ago. Distressed sales include properties that have been seized by lenders and short sales, where the struggling homeowner is allowed to sell the property for less than the outstanding mortgage.

"The pace of the housing market recovery quickened in April as home prices rose across the U.S.," Anand Nallathambi, CoreLogic's chief executive officer, said in a statement.

"We expect this trend to continue, bolstered by tight supplies and pent up buyer demand."

The report forecast home prices will rise by 2.7 percent in May compared to April and 12.5 percent from May 2012.

The top five states with the largest price gains over the past 12 months were Nevada, California, Arizona, Hawaii and Oregon. Only two states, Mississippi and Alabama, saw prices decline.

(Reporting by Leah Schnurr; Editing by Chizu Nomiyama)

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