WRAPUP 1-U.S. home prices rise in May, though pace of gains cools
* Home prices rose 1 percent in May, shy of expectations
* Consumer confidence index pulls back to 80.3 in July
NEW YORK, July 30 (Reuters) - U.S. home prices rose in May, suggesting the housing market recovery pushed ahead during the spring buying season, though the pace of gains cooled in what analysts said could be a sign of things to come.
Separate data released on Tuesday showed consumer confidence waned in July as Americans took a dimmer view of the outlook for the economy and labor market. Still, their view of current conditions was more upbeat, rising to the highest level in five years.
The S&P/Case Shiller composite index of 20 metropolitan areas gained 1 percent on a seasonally adjusted basis, shy of economists' forecast for a 1.5 percent increase, the closely-watched survey showed. That marked a slower pace than April's 1.7 percent rise.
On a non-adjusted basis, prices rose 2.4 percent in May.
Analysts said a moderation in price gains was to be expected given the acceleration home values have seen. A tightening of inventory available for sale, fewer foreclosures and buying from investors has helped push prices higher over the past year-and-a-half as the battered housing sector has gotten back on its feet.
"It's not surprising - it's been rising so quickly," said Celia Chen, senior director of housing economics at Moody's Analytics in West Chester, Pennsylvania.
Home prices compared to last May also fell short of expectations, though they still racked up a hefty 12.2 percent surge. It was the biggest annual gain since March 2006, matching a record set in April.
The report did not alter economists' views that the housing sector's recovery is progressing, making it a bright spot for the economy.
However, economists did flag the potential for higher mortgage rates to dampen the speed of the rebound down the line.
"There is probably going to be a depressing effect from higher mortgage rates, but it will not be enough downward pressure to keep the housing market from expanding," said Chen.
Borrowing costs have risen in the wake of the Federal Reserve's plans to start winding down its economic stimulus later this year if the economy progresses as expected.
Fed officials begin their two-day policy setting meeting on Tuesday and investors will be watching Wednesday's statement for further insight into when the Fed will begin reducing its $85 billion a month in bond purchases.
Since early May, mortgage interest rates have climbed about a percentage point. Data on Monday suggested the increase cut into pending home sales, which dropped in June.
Still, rates remain low by historical standards and most economists do not expect the higher costs to derail the housing market. In the short-term, it could also spur potential buyers to action as they rush to lock in rates before they rise further.
May's home price data likely did not capture the rise in rates as the contracts would have been signed before rates began increasing, Bank of America-Merrill Lynch wrote last week.
Market reaction to the day's data was muted with investors focused on the Fed.
Home prices in all 20 cities covered by the survey rose on a yearly basis, led by a 24.5 percent surge in San Francisco. Two cities - Dallas and Denver - reached record levels, surpassing their peaks reached during the housing boom. It was the first time any city has racked up a new all-time high, the survey said.
The rise in mortgage rates and speculation over when the Fed will unwind its stimulus may also have weighed on consumer confidence this month, said Christopher Low, chief economist at FTN Financial in New York.
The Conference Board said its index of consumer attitudes slipped to 80.3 in July from an upwardly revised 82.1 in June. The report was shy of economists' expectations for the index to hold steady at June's original reading of 81.4.
The expectations index dropped to 84.7 from 91.1. Still, consumers were not so gloomy about current conditions, with the present situation index rising to 73.6 from 68.7, the highest level since May 2008.