More listings but fewer sales are adding up to weaker home price gains this summer.
It was bound to happen after prices soared in 2013, well past the rate of employment or wage growth. Existing home sales, including those for single family houses and condominiums, fell 4.5 percent in the second quarter of this year from the same period in 2013, according to the National Association of Realtors. Home prices are slowly following suit.
Read MoreThis a better bet than most stocks
"National median home prices began their most recent rise during the first quarter of 2012 but had climbed to unsustainable levels given the current pace of inflation and wage growth," Realtors chief economist Lawrence Yun said.
The median existing home price increased 4.4 percent in the second quarter year over year to $212,400, but that is a significantly smaller gain than the 8.3 percent annual jump seen in the first quarter. This is likely because the number of listings for sale nationally rose 6.5 percent from a year ago. The number of local markets with double-digit annual price gains fell to 19 from 37 in the last quarter.
"At this slower but healthier rate, homeowners can continue steadily building equity. Meanwhile, for buyers, increased supply with moderate price gains is giving them better opportunities to choose," Yun said.
While certain local markets, like San Francisco and the New York metro area, still have very tight inventory, other markets are seeing a slew of new sellers. In Washington, D.C., the number of active condo listings jumped over 13 percent in July from a year ago, with single family listings up nearly 2 percent. In the Maryland suburbs of Montgomery County, single-family inventory jumped 38 percent.
"This is just the #tipoftheiceberg," tweeted Mike Aubrey, a D.C.-area real estate agent and HGTV real estate expert, in a response to the price numbers out Tuesday from the Realtors.
In an interview later, Aubrey called the spring season "barely a four-week blip, when homes were flying off the shelves. But what happened after that little four-week window was that people became more tentative really quickly. Prices have gotten much higher, and people aren't making more money."
Mortgage rates have not moved much in the past year, but the expectation is that they will move slightly higher in the second half of the year. Investors continue to move out of the market, with far fewer distressed homes to buy. Just 12 percent of second-quarter sales were distressed compared with 17 percent a year ago.
—By CNBC's Diana Olick