Average prices slipped by 0.2 per cent, pushing the annual rate of growth back to its lowest level since April 2006 at just 1.4 per cent.
However demand is showing signs of a resurgence after new buyer registrations increased for the first time since June 2007.
Richard Donnell, Hometrack's director of research, said: "In the wake of the credit crunch demand for housing fell by 45 per cent, but the latest Hometrack survey shows a small yet important turnaround in demand over February. However, the growth in demand was much lower than over the same period in previous years.
"While we expect demand to continue to improve in the coming months, it is too early to talk of a major turnaround in the fortunes for the housing market.
"A small but growing number of buyers appear ready to dip their toes in the market again but any upward pressure on prices is likely to remain limited for the foreseeable future."
Hometrack added that this year the supply of housing for sale had increased broadly in line with demand, resulting in the visible weakening of pricing levels.
The greatest turnaround in demand has been seen in London and the South East where new buyer registrations are up 13 per cent and 10 per cent respectively - higher than the supply of homes coming on to the market which suggests that prices could start to firm in the months ahead.
In contrast, the supply of housing for sale has increased more than demand in the Eastern, North West and Yorkshire and Humberside regions as well as Wales and it is these markets where pricing is likely to remain under pressure in the short term.
Donnell concluded: "With most of the largest 'falls' being seen in indicators of market activity over recent months it seems likely that these will start to improve over the months ahead supported by the relatively strong economic fundamentals that remain in place.
"However, with affordability levels remaining stretched there is unlikely to be much upward pressure on average prices in the next few months."
