Single-family home prices were unchanged in March from February, but fell in the first quarter under renewed pressure before federal aid for buyers faded away, Standard & Poor's/Case Shiller home price indexes showed on Tuesday.

Prices have rebounded from lows hit during the crisis, yet the end of tax incentives for home buyers, combined with mounting foreclosures, suggests more weakness, S&P said.

Home sellers became more realistic in setting initial prices amid a record supply of foreclosures, aiming to entice buyers during their race to lock in tax credits before they expired at the end of April, housing experts said.

Overall, I think the housing market has bottomed, but it will remain sluggish, said BNP Paribas economist Yelena Shulyatyeva. She doubts there will be any upward pressure on prices in the near future.

The S&P composite index of prices in 20 metropolitan areas was unchanged in March from February on a seasonally adjusted basis, better than the 0.3 percent decline forecast in a Reuters survey.

On an unadjusted basis, prices fell 0.5 percent in March after a 0.9 percent February drop, worse than the estimated 0.4 percent decline.

For the first three months of the year, the national home price index fell 3.2 percent, unadjusted, compared with a 1 percent drop in the fourth quarter. The index was up 2 percent, however, from the same quarter a year ago -- the first annual increase in more than three years.

The 20-city index posted a 2.3 percent annual increase in March, near the 2.4 percent forecast.

Despite improvement on a year-over-year basis, David M. Blitzer, Chairman of the Index Committee at S&P, said the March monthly report was not encouraging.

It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices, he said in a statement. Now that the tax incentive ended on April 30, we don't expect to see a boost in relative demand.

Buyers had to sign contracts by April 30 to get federal tax credits of up to $8,000. Sales are widely seen dropping off in the weeks after the tax credit's end, with the rush to make deals by April's end subtracting from future sales.

Applications for loans to buy homes stumbled to a 13-year low in the second week without the credit, the Mortgage Bankers Association reported last week.

On the plus side, financial market woes in Europe have spurred a flight to quality into U.S. Treasuries, driving down the yields used to peg U.S. mortgage rates.

Mortgage rates near record lows under 5 percent and improving employment conditions should put a floor under the U.S. housing market, economists said.

(Additional reporting by Emily Flitter; Editing by Padraic Cassidy)

BNP Paribas