U.S. home prices rose 12.1 percent in June from a year earlier, nearly matching a seven-year high. But month-over-month price gains slowed in most markets, a sign that higher mortgage rates may weigh on the housing recovery.
The Standard &Poor's/Case-Shiller 20-city home price index slowed only marginally from May's year-over-year gain of 12.2 percent, the fastest since March 2006. And all 20 cities posted gains from the previous month and compared with a year ago, according to the report released Tuesday.
Home prices in Las Vegas soared 24.9 percent from a year earlier to lead all cities. Purchases by investors have helped drive that increase. Other cities hit hard by the housing bust also posted stunning gains in the past year. Prices have jumped 24.5 percent in San Francisco and nearly 20 percent in both Los Angeles and Phoenix.
Still, 14 of the 20 cities posted smaller gains in June compared with May. That's unusual considering June is the middle of the summer buying season.
Steady job gains and low mortgage rates have encouraged more Americans to buy homes. And even as demand has risen, a limited number of homes have been available for sale. The combination has led to sharp prices gains.
But mortgage rates have climbed more than a full percentage point since May. The increase has already slowed sales of new homes in July. And economists expect it could drag re-sales lower in August.
A slowdown from the strong price gains in recent months isn't necessarily a bad thing, economists said. It may keep home prices from becoming unaffordable.
Stan Humphries, chief economist at real estate data provider Zillow, said price gains will likely keep slowing in the coming months as investors make fewer purchases, mortgage rates rise further and more homes become available.
"This ongoing stabilization ... is happening, and it's not the end of the world for the housing market," he said.
The index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The June figures are the latest available. They are not adjusted for seasonal variations, so the monthly gains reflect more buying activity over the summer.
The housing rebound that began last year has helped drive economic growth, boost Americans' wealth and create more construction jobs.
But mortgage rates began to rise after Federal Reserve Chairman Ben Bernanke first signaled that the Fed might reduce its bond purchases later this year. The bond purchases have helped keep mortgage rates and other borrowing costs low.