Although very slight, U.S. home prices continued to improve steadily, up another 0.5% in May, according to the latest FNC Residential Price Index. This price appreciation is coupled with continued improvement in housing market fundamentals.

FNC’s data reveals that the pace at which home prices are rising is modest, with an average increase of only 0.4% per month in the last six months. Additionally, the rate of annual price appreciation seems to be much slower and more sustainable than reported by a number of other closely watched price indices.

Despite rising interest rates, the cost of mortgage financing continues to remain near historical lows.

An improving economy and housing market fundamentals have driven up prices. However, foreclosures have fallen quickly, with distressed sales making up only 13.9% of total home sales, down from 16.2% in April and 19.6% one-year prior. The median sales-to-list price ratio in May was 96.1, up from 95.4 in April and 93.2 a year ago.

In the 100 largest metro areas, the FNC 100-MSA composite index shows that May home prices rose from the previous month at a seasonally unadjusted rate of 0.5%.

The 30-MSA and 10-city MSA composites both recorded a 0.4% improvement.

Year-over-year, home prices rose a slight 4% from one-year prior.