Home prices are increasing, new building permits are on the rise, and foreclosures have dropped, offering the strongest evidence yet of a sustained recovery in the Greater Boston housing market, according to report to be released Thursday.

In its most optimistic housing forecast in recent years, the nonprofit Boston Foundation predicts that housing and condominium sales will continue to improve through the end of this year, and that foreclosures will be down by 40 percent compared with 2012. But its Greater Boston Housing Report Card also warned the rapidly rising homes prices could outstrip incomes, creating an affordability crisis that is distancing working-class, moderate-income families from home ownership.

“We think we’ve turned the corner,” said Barry Bluestone, the director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University and lead author of the study. But he added, “The economy is leaving housing affordability behind.”

The housing recovery in Boston and its surrounding communities is marching ahead despite the fact that the state’s unemployment rate has jumped nearly a percentage point since April, to 7.2 percent in July. The rising jobless rate would probably result in stagnating or declining household income, according to the report.