By Amina Niasse

NEW YORK (Reuters) -U.S. annual home price growth accelerated for a second straight month in July, signaling that softening prices in the market may be bottoming out, according to a report released on Tuesday.

Home purchase prices increased 4.6% on a year-over-year basis in July, up from a revised 3.2% increase in the prior month. June marked the first acceleration in annual price growth since February 2022, the Federal Housing Finance Agency (FHFA) said.

The report also showed prices rose moderately on a month-over-month basis, in line with the trend over the past quarter. Prices were up 0.8% in July, compared with a revised 0.4% month-over-month increase in June.

The Federal Reserve's interest rate increases, which began in March 2022, have driven up home loan costs and have discouraged owners from selling their houses, exacerbating an inventory shortage in the housing market and helping to keep prices higher.

The weekly average rate on a fixed 30-year mortgage has remained above 7% since August, marking the highest rates since 2002.

Home prices in the New England and Middle Atlantic regions rose 8.1% and 7.1%, respectively, on a year-over-year basis, the largest regional gains in July, according to FHFA data.

"Regionally, all nine census divisions posted positive price appreciation over the last 12 months, although the Pacific and Mountain divisions experienced only modest growth," said Nataliya Polkovnichenko, FHFA's supervisory economist.

A separate report showed that the S&P CoreLogic Case-Shiller national home price index appeared to have bottomed out over the summer, notching a 1% year-over-year gain in July after being unchanged in June.

Prices in Chicago and Cleveland accelerated the most on a city basis for the third consecutive month, the Case-Shiller data showed.

(Reporting by Amina Niasse; Editing by Paul Simao)