Home prices rebounded at annual rates of more than 10% in 2012 and 2013 according to most popular measures of home price appreciation, buoyed by a lack of supply and a large number of cash buyers, a Kroll Bond Rating Agency client note reports.

“Perhaps the single biggest factor behind the apparent improvement in home prices from 2011 through 2013 was closing the gap between sales of foreclosed homes and voluntary sales,” Kroll states in its note to clients.

In 2010-2011, the discount for an REO home versus a comparable voluntary sale was as much as 40%, but by 2013 this discount had largely disappeared, Kroll says.

KBRA believes that over the next two years home price appreciation is likely to slow considerably in many markets around the country, and even decline modestly, as the positive effect of extraordinary factors such as a surfeit of cash buyers and tight supply of homes dissipates.

After several years of double digit valuation increases, prices for residential real estate in the U.S. are showing signs of slowing to levels that are more aligned with rates of employment and consumer income, and thus sustainable, they conclude.