With inventory still low, home prices rose 1.6% in the second quarter of 2017 from the first, according to the Federal Housing Finance Agency. Home values were up 0.1% from May to June.

In a year-over-year comparison, home prices rose 6.6% from the second quarter of 2016.

"U.S. house prices rose in most states during the second quarter," said FHFA Senior Economist William Doerner. "New-home sales are climbing, but relative to the overall population, they still remain low from a historical perspective. The tight inventory is a major explanation for why house prices have been increasing every quarter over the last six years."

The supply of existing homes fell 7.1% in June from the previous year, representing the 25th consecutive annual decline, according to the National Association of Realtors. Homebuilders facing challenges in labor shortage and cost to build are also contributing to a lack of supply by falling short on housing starts.

Home prices rose in 48 states and the District of Columbia. Washington and Colorado were the top two states in annual appreciation, up 12.4% and 10.4%, respectively. Idaho was up 10.3% from a year ago, trailing just behind Colorado.

The only states where home prices declined in the second quarter were West Virginia, where they dropped 1.22% from last year, and Alaska, by 0.33%.

Of the nine census divisions, home prices appreciated most in the Pacific division, which posted a 2.6% quarterly increase. The Middle Atlantic division experienced the weakest increase, as home prices were up 0.8% from the previous quarter.

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