|M/M % Chg||0.0||0.2||0.8|
|Y/Y % Chg||4.2||4.3||4.5|
House prices began 2017 with a modest, but still larger than expected, increase. Even so, a 0.2 percent monthly rise in the Nationwide's HPI, which followed an unrevised 0.8 percent gain in December, saw the annual inflation rate ease from 4.5 percent to 4.3 percent, its lowest mark since November 2015.
January's advance left the quarterly change in prices, normally seen as the best guide to underlying developments, unchanged at 0.7 percent, equalling the smallest increase since February-April 2015. Nonetheless, on the Nationwide's measure house prices have still not posted a monthly decline since June 2015.
Prospects for 2017 are inevitably clouded by possible Brexit effects although it must be said that any impact from June's vote has so far been muted at best. Supply conditions remain very tight and mortgage rates at or near record lows. Neither factor is likely to change much over coming quarters. On balance, the likelihood is that the housing market will make further ground this year and the Nationwide is forecasting an increase in prices of around 2 percent. Such an outcome would not trouble the BoE.
The Nationwide House Price Index (HPI) provides house price information 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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