House prices rose a seasonally adjusted 0.4% in May as the year-over-year increase dipped lower, according to a Federal Housing Finance Agency report (link opens as PDF) released today.

The report exceeded analyst expectations of a 0.3% rise, but longer-term trends point to potential trouble ahead. From May 2013 to May 2014, prices were up just 5.5%, compared to a revised 6.1% annual increase for April.



The FHFA House Price Index is calculated using single-family home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. At current levels, it is comparable to readings from July 2005. 

This latest report pokes another hole in what was, until recently, a seemingly steadily improving housing market. Last week, the largest drop ever recorded for housing starts in the South pulled national numbers down 9.3%, and the S&P/Case-Shiller Home Price Indices for April corroborate this report's signal of price growth trouble. This latest price growth slowdown could also put a dent in homebuilders' confidence, a metric that has only recently made positive moves.

While existing-home sales picked up slightly in June, investors will want to keep a close eye on Thursday's new-home sales report for further signs of housing market trouble.

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