Is it good or bad news that home prices have increased for two months straight?

This is quite a reversal from the first few months of 2009 when prices were falling by anywhere from 12 percent to 20 percent.  One of my co-workers compared the start of last year’s housing market to a funeral.

At first glance, the increase in prices seems positive — it’s a sign that confidence is returning in the housing market.

More and more homeowners are starting to feel more comfortable and have decided to put their homes on the market after holding back for a long time.   I’ve seen at least half a dozen for-sale signs pop up in the front yards of my neighbors in the last two weeks.

But the price increases are also bad news for buyers. Prices inflated so much during the housing boom, that the recent declines were welcomed by many who felt they would never be able to purchase a home in Greater Boston.

The price increase could be temporary, and of course, two months doesn’t make a trend.

The homebuyer tax credit encouraged buyers who were sitting on the sidelines, creating some demand. Meanwhile, inventory has been sagging but that could change as the spring market approaches and the economy improves.

Where in Massachusetts have home prices dropped the most since the peak of the market?

Mostly in urban areas that have been hard-hit by foreclosures.

Median selling prices for single-family homes in communities like Brockton and Chelsea, for example, have plunged by 40 percent or more since 2005, when home prices peaked in Massachusetts, according to The Warren Group.

Foreclosures in those towns have surely helped to drag down home values.  In fact, Chelsea and Brockton are among the cities with the highest foreclosure rates in the state.

Brockton’s median home price stood at $165,000 in 2009, a 40 percent decline from $275,000 four years earlier.

And in Chelsea, the median price plummeted almost 48 percent to $168,900 from $323,250.

Here are few more towns and cities that saw steep drops in median prices from 2005 to 2009:

Lawrence (-35 percent)
Revere (-35 percent)
Everett (-36 percent)
Randolph (-36 percent)
Athol  (-39 percent)
Hyannis (-42 percent)
Roxbury  (-43 percent)
East Boston (-45 percent)
Mattapan (-47 percent)