House prices climbed 6.8% in May 2010 from last year, the largest yearly increase since July 2006, according to a report from real estate data provider Clear Capital. In June 2009, Clear Capital reported a 19.3% drop in May house prices, a “far cry” from the increase shown in this report a year later, said Alex Villacorta, senior statistician at Clear Capital. The rolling quarter-over-quarter number, which measures houses prices against those three months ago showed a 1.8% decline, an improvement from the 5% drop in April. “We continue to see sustained price growth throughout much of the country with yearly price gains reflecting the housing recovery off of last year’s lows,” Villacorta said. “The expiration of the tax credit at the end of April has certainly contributed to the growth of prices we are observing and as more sales close before the June 30 deadline we expect that markets across the country will continue to see strengthening of prices.” The amount of REO properties on the market seems to be dropping, too, according to Clear Capital.  The national REO saturation rate dropped to 27.8%, down from 41.7% last year. “This dramatic shift in price trends reflects the unprecedented volatility over the last couple of years and the delicate state of local real estate markets around the country,” Villacorta said. While quarterly prices in three of the four regions remained below levels from three months ago – the 0.3% increase in the West being the only exception – prices should maintain positive momentum heading into the summer, according to the report. Prices in Dallas, Texas increased 3.4% from the end of 2009, the highest jump for all markets over the last quarter. The REO saturation rate dropped to 36.6% from 41.1% there as well, but the largest reduction in REO saturation came in San Jose, Calif. There, the amount of REO on the market fell to 19.6%, and helping prices gain 2% from the previous quarter and 20.2% from last year. The worse performing market in May was Detroit. There, prices dropped 10.7% from the previous three months, but it’s an improvement from the 14.4% drop seen in the previous month. The REO saturation rate in Detroit reached 48.9% in May. Write to Jon Prior.