U.S. home prices appear to be cooling off, with last year's sharp gains giving way to more modest increases, according to figures from two major surveys released today.

Home prices were unchanged in April, according to the Federal Housing Finance Agency's (FHFA) monthly report, while showing an annual gain of 5.9 percent over the previous 12 months. The FHFA's annual rate of change has been slowing gradually since December, when it stood at 7.7 percent.

Another major indicator, the Standard & Poor's/Case-Shiller monthly home price indices, have also been slowing since late last year. The S&P 20-city composite showed a 10.8 percent annual gain in April, down from a peak of 13.8 percent reached last November. On a monthly basis, the index showed a 1.1 percent gain over May.

Outlook favorable, but problems persist

"Although home prices rose in April, the annual gains weakened," said David Blitzer, chair of the Index Committee at S&P Dow Jones Indices. "Overall, prices are rising month-to-month but at a slower rate."

Blitzer said short-term economic figures appear to favor an improving housing market, with mortgage rates expected to remain low for the immediate future and a gradual pickup in employment. However, qualifying for a loan remains a challenge for many borrowers and first-time homebuyers remain reluctant to enter the market.

A modest increase in the supply of homes available for sale may be helping to slow the increase in prices. The National Association of Realtors has reported this week there was a 5.5 month supply of single-family homes on the market in April, up from 5.1 months in December and 4. 6 months in July 2013.

Cash sales still strong

All-cash sales, which have been accounting for about one-third of all home purchases in recent years, have largely remained unchanged as a share of the market. Favored by investors, they have been a significant factor in driving home price increases.

Mortgage rates do not appear to be a factor in cooling off price increases; in fact, by many accounts they are actually lower this week than they were one year ago at this time.

According to FHFA figures, U.S. home prices have recovered to within 6.9 percent of their pre-crash peak in April 2007 and are now roughly at their July 2005 level. The S&P index puts prices about 19 percent below their pre-crash highs. The FHFA figures are based on purchase mortgage data from Fannie Mae and Freddie Mac; the S&P survey is based on repeat sales of individual properties in 20 major metropolitan markets.

Published on June 25, 2014