Prices were cut on nearly one quarter of U.S. homes on the market in May, the same as April, with a growing supply of unsold homes keeping buyers in the driver's seat, real estate web site Trulia.com said on Wednesday.

Sellers lowered asking prices at least once on 22 percent of homes listed as of June 1, unchanged in the month and up from 20 percent two months ago, San Francisco-based Trulia said in a report provided to Reuters before official release.

A year ago, prices had been cut on 23.6 percent of listed properties.

Sellers may face a setback after a brief spring sales spree driven by a rush for federal tax credits of up to $8,000. To qualify, borrowers who may have purchased in the summer and fall raced to meet the April 30 deadline to sign contracts.

Spring sales could be providing sellers with a false state of optimism, said Trulia Chief Executive Pete Flint.

For the unforeseen future, buyers will continue to have the negotiating power and I expect we will see sellers get aggressive via price cuts throughout the summer, he said in a statement.

In the weeks since the tax incentive expired, applications to buy homes toppled to a 13-year low and home builder sentiment worsened.

Inventory levels are growing as sellers gain comfort that the spring season will pave the way for healthier summer sales, Trulia said.

Banks coping with record numbers of repossessed properties will add to the supply as they place the homes on the market, though most economists expect that pace will be measured.

Sellers slashed a total of $26.7 billion in May from asking prices, more than the $25 billion in April and $22.8 billion in March, according to Trulia. The average discount on the reduced homes held at 10 percent from the original listing.

More than a year of tax incentives put the U.S. housing market on a more solid footing. However, a significant recovery is unattainable without a meaningful improvement in employment, economists agree.

Government data earlier this month showed private-sector hiring rose by 41,000 in May, far overshadowed by the 411,000 temporary census jobs.

Price cutting over the past year was the greatest in cities based in the Midwest and South. Kansas City, Missouri led by list, with 31 percent of homes for sale cutting prices at least once, up from 20 percent a year earlier.

Other cities with the largest increase in share of homes that lowered prices were Arlington, Texas; Cleveland, Ohio; Louisville, Kentucky, Houston, Texas and Minneapolis, Minnesota.

Western cities had the most improvement in the share of sellers slicing prices over the year. These were among the cities that had gained the most during the housing boom and have already suffered the most in the crash.

Sellers dropped prices on just 10 percent of properties listed in Las Vegas in May, for example, compared with 30 percent a year earlier. Six California cities were among the 10 cities showing the most improvement.

Price-cutting on luxury homes listed at $2 million or more was unchanged in May, with an average discount of 14 percent, Trulia said. Homes in this category account for less than 2 percent of total inventory, but almost one-quarter of total dollars slashed from all homes for sale.

(Editing by Chizu Nomiyama)