Signs of a stable housing recovery are evident in Florida and Arizona, according to BMO Financial Group.

The upward home price momentum is a direct indication that Florida and Arizona housing markets are improving. 

Florida home prices plunged more than 40% peak-to-trough, but were down 1.8% year-over-year in the second quarter of 2012. This is the slowest decline since 2007, according to the Federal Housing Financing Agency Index.

Home prices in Miami and Tampa have also increased 9% from a year ago, according to the Case-Shiller Index.

"We are seeing a significant uptick in the number of people inquiring about either refinancing their current mortgage or looking to finance a new home purchase," said President Dave Maraman of BMO Harris Bank Florida. "We continue to increase the number of mortgage specialists in recognition of the improved market."

Arizona is in a faster recovery mode because of higher home prices and an increase in construction activity.

The supply and demand of homes is the main reason for a progressive recovery, with sales up 2.3% 

Phoenix home prices plunged 57% before bottoming in Sept., but have increased 20% since then.

"We have seen a significant increase in the number of people inquiring about a home purchase or who are interested in refinancing their current residence," said president Steve Johnson of BMO Harris Bank Arizona.

He added, "We know there is significant growth potential in this market which is why we have expanded our mortgage team to support our customers."