U.S. home prices rose 12.4 per cent in July compared with a year ago, the biggest annual increase since February 2006, as the number of Americans looking for homes climbed.

The Standard &Poor's/Case-Shiller 20-city home price index showed gains in July in all  20 cities it follows from the previous month and compared with a year ago.

Since bottoming out in March 2012, four years after the financial crisis made getting a mortgage difficult, home prices have rebounded about 21 per cent.

But they remain about 22 per cent below the peak reached in July 2006.

Buyers who pay cash

A report last month by Goldman Sachs found half of all U.S. home sales were made with cash — meaning the buyer did not require a mortgage.

These buyers may be foreigners, who buy real estate outright, or investors — there are reports of people buying 10 or more houses in some depressed areas.

The month-over-month price gains shrank in 15 cities in July compared with the previous month, indicating prices might be peaking.

At the same time, more new homes are being built, with an increase in the number of multi-unit dwellings being built. That has eased the shortage of new housing on the market, which had helped inflate prices over the past year.

Concern about a housing bubble

But Robert Shiller, one of the founders of the Shiller index, says he is concerned about a bubble being developed in some cities.

"Las Vegas, some California cities, the price increase is so dramatic it looks like some of the worst days of the boom that preceded the 2008 crisis," he said in an interview with CBC's Lang & O’Leary Exchange.

Home prices soared 27.5 per cent in Las Vegas from a year earlier, the largest gain. In San Francisco, the increase was  24.8 per cent.

Many of those buying now are concerned about making a purchase before interest rates rise, said Shiller, a Yale professor of economics.

"People talk about low interest rates and the desire to get in and lock a rate in and also the recovery from the recession. I don’t think it has developed into a bubble in most places yet," he said.

Mortgage rate fears

Shiller said most Americans don't expect the value of their homes to rise more than four per cent in a year.

Mortgage rates have increased more than a full percentage point since May in the U.S., and that should moderate house price increases over the next year.

The National Association of Realtors noted that interest in homes declined in August, after rates edged up.

The U.S. housing market has been recovering over the past year, helped by steady job growth, low mortgage rates and relatively low prices.

With files from The Associated Press