National home prices continued to recover in January, but prices were still far below their peak, according to the Home Price Index (HPI) report from Lender Processing Services, Inc. (LPS).

In January, national home prices averaged $208,000, up 0.3 percent from December and 6.7 percent year-over-year. However, prices were still 21.4 percent below their June 2006 peak.

The state that led with the biggest monthly price increase was Georgia, where prices were up 1.6 percent.

Three hard-hit states—Arizona, California, and Florida—saw respective price gains of 1 percent, 0.7 percent, and 0.4 percent.

On the other hand, three east coast states struggled, with Connecticut experiencing the biggest month-over-month loss at 0.9 percent. New Jersey saw prices decline by 0.4 percent, while prices fell 0.2 percent in New York during the same time period.

Among metro areas, Atlanta experienced the biggest monthly increase at 1.7 percent, while Phoenix followed with a 1.2 percent gain. Three other metros in the top five were San Jose (+1.2 percent); Hilton Head, South Carolina (1.1 percent); and Baltimore (1.1 percent).

Four Connecticut metros saw prices fall furthest from December to January: New Haven (-1.3 percent), Torrington (-0.9 percent), Norwich (-0.9 percent), and Bridgeport (0.8 percent).

Although prices are continuing their recovery in Arizona, the state is still 36.6 percent below its May 2006 peak, while Florida is 39.5 percent below its April 2006 peak.

Texas is just 1 percent below its August 2007 peak, and Colorado is also close to its peak, staying just 2.9 percent below prices in June 2007.

by Esther Cho