U.S. home prices continued to increase in May and recorded best annual returns in more than seven years, according to a report released Tuesday by S&P Dow Jones Indices.

The S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed increases of 2.5 percent and 2.4 percent for the 10- and 20-City Composites from April to May.

On an annual basis, the 10- and 20-City Composites annual returns posted the best year-over-year gains since March 2006, rising 11.8 percent and 12.2 percent respectively, the report revealed. All 20 cities posted year-over-year gains.

"Home prices continue to strengthen," says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. "Two cities set new highs, surpassing their pre-crisis levels and five cities - Atlanta, Chicago, San Diego, San Francisco and Seattle - posted monthly gains of over three percent, also a first time event," Blitzer added.

The report showed Dallas and Denver reached record levels surpassing their pre-financial crisis peaks set in June 2007 and August 2006, marking the first time any city has made a new all-time high.

As of May 2013, average home prices across the United States are back to their spring 2004 levels but are still 24 percent to 25 percent below their June/July 2006 peaks, the report said.

Compared to March 2012 lows, home prices for the 10-City and 20-City Composites have recovered 15.9 percent and 16.5 percent respectively. Endi

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