However on a year on year basis house price remained flat underlining the markets ongoing stability.
Nationwide chief economist Robert Gardner said there were tentative signs of recovery as the employment market improves and the Funding for Lending Scheme increases mortgage availability.
He said: “While the economic backdrop remains challenging, there are reasons for cautious optimism that activity will gather momentum in the months ahead.
“In particular, employment is rising at the fastest pace since the late 1990s which if maintained should help support demand for homes.”
Gardner did however warn that progress is likely to be gradual as stubbornly high interest inflation will continue to exert pressure on household finances.
Nationwide also found that the rate of homeownership has also continued to decline having dropped 5% from an all time high of 70.9% in 2003 to 65.3% in 2012.
The report revealed a marked decline in the number of younger buyers. The most prominent decline was in the 25-34 age group which saw an increase in the number of households renting from 40% in 2002 to 57% in 2012.
