|M/M % Chg||0.3||0.3||1.0|
|Y/Y % Chg||4.7||4.6||5.2|
House prices rose for a third consecutive month in May according to the Nationwide's latest survey. A 0.3 percent increase versus April was in line with expectations and saw the annual inflation rate slide from 5.2 percent to 4.6 percent, its weakest mark since August 2013.
However, over the three months to May, the HPI was up 0.9 percent, a couple of ticks above its April rate and its highest mark since February. As yesterday's financial data showed, mortgage applications in April registered their strongest level in more than a year and with mortgage rates still around record lows and supply tight, market fundamentals remain positive. Against this backdrop, house prices should continue to trend higher over coming months, albeit at a rate well short of that seen in 2014.
Ultimately the Nationwide expects house price inflation to converge with earnings growth which, over the long-run, has averaged around 4 percent.
House price information is derived from Nationwide lending data for properties at the post survey approval stage. Nationwide house prices are mix adjusted that is they track a representative house price over time rather than the simple average price.
Home values affect much in the economy especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.
Although the Nationwide data are calculated similar to the Halifax method Nationwide substantially updated their system in 1993 following the publication of the 1991 census data. These improvements mean that Nationwide's system is more robust to lower sample sizes because it better identifies and tracks representative house prices. Historically, the data go back to 1952 on a quarterly basis and 1991 on a monthly basis.
Over long periods the Halifax and Nationwide series of house prices tend to follow similar patterns. This stems from both Nationwide and Halifax using similar statistical techniques to produce their prices. Nationwide's average price differs because the representative property tracked is different in make up to that of Halifax.
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