The steep upward pace of home price increases is starting to simmer down, as the 10-city and 20-city composites posted annual gains of 10.8%, which is significantly lower than last month.

“Slow and steady is the reoccurring theme for these past few months of home price data,” Quicken Loans Vice President Bill Banfield said. “While the year-over-year growth fell below expectations, the rise should instill confidence in a sustained and significant recovery in the housing market.”

According to the most recent S&P/Case-Shiller Home Price Indices report, 19 of the 20 cities witnessed lower annual gains in April than in March, with California seeing its returns worsen by approximately three percentage points.

The 10-city and 20-city composites increased 1% and 1.1%, respectively, in April. Boston was the only city whose annual rate improved, moving from 8.3% in March to 9.0% in April.

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

A year ago some Sunbelt cities experienced year-over-year numbers close to 30%, where as now all are below 20%: Las Vegas (18.8%), Los Angeles (14.0%), Phoenix (9.8%), San Diego (15.3%) and San Francisco (18.2%).

And as of April, average home prices across the nation are back to summer 2004 levels.

“Near term economic factors favor further gains in housing: mortgage rates are lower than a year ago, the Fed is expected to keep interest rates steady until mid-2015 and the labor market is improving,” Blitzer said.

But there is still room to grow, Blitzer explained. “Prices are being supported by cash sales, low inventories and declining foreclosure and REO sales. First-time homebuyers are not back in force and qualifying for a mortgage remains challenging,” he said.  

“The question is whether housing will bounce back before the Fed begins to tighten sometime next year,” Blitzer said.