U.S. single-family home prices edged up in July, but the overall trend is slowing amid improving supply, which together with easing mortgage rates could make buying a house more affordable.

House prices gained 0.1% on a month-on-month basis after being unchanged in June, the Federal Housing Finance Agency said on Tuesday. They increased 4.5% in the 12 months through July, the smallest rise since June 2023, after an upwardly revised 5.3% advance in June. The rise in annual house prices was previously reported to have been 5.1%.

"For the third consecutive month U.S. house prices showed little movement," said Anju Vajja, deputy director for FHFA's Division of Research and Statistics. "Gradually declining mortgage rates and relatively flat house prices may improve housing affordability."

Mortgage rates have dropped to more than 1-1/2-year lows and could decline further after the Federal Reserve last week cut its benchmark overnight interest rate by 50 basis points to the 4.75%-5.00% range.

With lower borrowing costs expected to stimulate demand, which could outstrip supply, an outright decline in house prices is unlikely. Previously owned houses remain in short supply in many regions even though national inventory has been increasing.

There were solid monthly house price increases in the Pacific, Mountain, East North Central and New England regions. House prices fell on a monthly basis in the West South Central, East South Central and South Atlantic regions.

All nine census regions recorded annual house price gains, with big increases in the Middle Atlantic, East North Central, New England and East South areas. Prices in the West South Central region lagged with a 1.6% increase.