U.S. home prices rose in April but its annual rate of increase dropped sharply, a leading measure of U.S. home prices showed Tuesday.

In April, the S&P/Case-Shiller Home Price Indices show the 10- City and 20-City Composite Indices gained 1.0 percent and 1.1 percent month-over-month, respectively, said S&P Dow Jones Indices in a report.

On a yearly basis, however, the 10-City and 20-City Composites both posted year-over-year increases of 10.8 percent in April, and all the 20 cities except for Boston saw lower annual gains in April than in March, the report showed.

"Although home prices rose in April, the annual gains weakened, " said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. "While the annual numbers worsened, the monthly figures were seasonally strong," he added.

Blitzer said that near term economic factors favor further gains in housing, as mortgage rates are lower than a year ago, the U.S. Federal Reserve is expected to keep interest rates steady until mid-2015 and the labor market is improving.

"However, housing is not back to normal," Blitzer noted. "The question is whether housing will bounce back before the Fed begins to tighten sometime next year."

As of April, average home prices across the United States are back to their summer 2004 levels, the report revealed.

Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is approximately 18 percent to 19 percent, while the reUScovery from the March 2012 lows is 25 percent to 26 percent for the 10-City and 20-City Composites, said the report.