Phoenix and Sacramento, two of the markets hardest hit during the housing crisis, saw some of the strongest price appreciation nationwide as a result of undervaluation from the crash.

However, in the December Home Value Forecast, Pro Teck Valuation Services revealed that activity in these markets is slowing as the housing inventory remains low and home prices throughout the nation are rising.

“Home Value Forecast has been pointing out for the past year that most of the fundamental factors for a recovery in home sales activity and prices are falling in place. However, the residential real estate market has always had a strong psychological component driven by consumer confidence,” said Tom O’Grady, CEO of Pro Teck.

A recent survey by Trulia (TRLA) revealed that consumer confidence in homeownership is on the rise as the recovery continues.

“In this month’s release it is interesting to see how prices reflecting current consumer confidence and longer term market fundamentals like employment track one another, the later always anchoring consumer perception from straying too far,” said O’Grady.

O’Grady states that when home prices are on the rise, homebuyers believe they will keep rising; conversely, when prices are dropping, buyers think they will continue to decline. The current increase in home prices is a key factor behind pushing buyers who may be on the fence about homeownership, leading to higher turnover rate and reinforcing the existing trend.

The HVF also lists the ten best and worst performing metros with regard to a number of leading real estate market indicators such as sales and listing activity, days on markets and distressed sales activity.

“Three of the top ranked metros are located in Texas while another three are in Southern California.  The former are markets which really did not exhibit bubble conditions during the nationwide run up and, thus, did not need to experience a meaningful housing price correction,” said Michael Sklarz, principal of collateral analytics and contributing author to Home Value Forecast.

“The bottom-ranked metros also represent an interesting mix with four being in the greater New York-New Jersey-Connecticut area. There also are four in the Southeast with new additions to the ranking including the metros of Little Rock and Knoxville. Most of the bottom-ranked have double-digit months of remaining housing inventory,” added Sklarz.

Moving into 2013, it will be important for homeowners to continue the trend of increased consumer confidence.