House prices continued to fall in May. A 0.1 percent monthly decline was significantly shallower than expected but still the eighth drop in the last nine months. Annual inflation was minus 3.4 percent, down from minus 2.7 percent in April and the lowest in nearly 14 years. Prices were 4 percent below their August 2022 peak. However, the Nationwide still expects a soft landing for the housing market in 2023 as labour market conditions remain solid and household balance sheets appear in relatively good shape.

In terms of the broader picture, today's update puts the UK's ECDI at 14 indicating a modest degree of outperformance by overall economic activity. That said, at minus 14, the ECDI-P shows that the real economy is still running slightly behind market expectations.

Prices are seen falling 0.5 percent on the month, reversing April's advance.

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.