WASHINGTON (Reuters) - U.S. single-family home prices were unchanged in May and the annual increase was the smallest in 10 months as higher mortgage rates stifled demand, boosting housing supply.

The unchanged reading in house prices followed a 0.3% month-on-month rise in April, the Federal Housing Finance Agency said on Tuesday. In the 12 months through May, house prices increased 5.7%. That was the smallest year-on-year advance since July 2023 and followed a 6.5% gain in April.

A surge in mortgage rates in spring depressed sales, pushing existing homes inventory to the highest level in nearly four years in June. New single-family housing supply jumped to the highest level since February 2008.

The average rate on the popular 30-year fixed mortgage has since pulled back from a six-month high of 7.22% in early May and averaged 6.78% last week, data from mortgage finance agency Freddie Mac showed. Residential investment, which includes homebuilding and sales, contracted in the second quarter after notching double-digit growth in the January-March quarter.

All nine census regions recorded annual house price gains in May, with large increases in New England and Middle Atlantic. The West South Central and Pacific regions reported moderate price increases relative to the other regions.