The three month rate of decline accelerated to 1.5%, as the average house price fell to £164,381 from £166,757 in October.
This is the largest fall over three months since April 2009, but far short of the 5 to 6% falls each month during the price crash.
“If the downward trend continues into December, annual inflation would drop to between 0% and -1% by the end of 2010. This compares to a rate of +5.9% at the end of 2009,” said Nationwide chief economist Martin Gahbauer.
He said the case was growing for more quantitative easing for the boost it could give the housing market, after the October minutes of the Monetary Policy Committee (MPC) showed the issue was back on the table.
Gahbauer said quantitative easing cuts the cost of government borrowing and has the knock-on effect of lowering the cost of fixed rate loans. In fact, the price of two-year fixed rates mortgages has already tumbled this year as markets anticipated further quantitative easing, he said.
Further easing, or investment in bank debt or mortgage-backed securities would inject liquidity by improving wholesale funding conditions, explained Gahbauer, making it easier for banks to pay down debt and encourage investors to move cash into property as inflation rises.
Meanwhile, the housing market seems to be finding a balance between supply and demand as the flood of people putting properties on the market fell back in October, according to the Agency Express Index.
Reports of house price deflation have dampened seller enthusiasm, but compared to the property shortage in October 2009, 16.7% more sellers put properties on the market this October.
Seven regions in the UK reported increased house sales, including the North West with a 23.1% increase, Greater London with a rise of 17.5% and the East Midlands which had an uplift of 17.1%.
Scotland fared worst with a drop in sales of 11.4% with Central England seeing a fall of 7.6% and the West Midlands going down by 7.5%.
Leicester saw sales more than double in October with a 127.8% increase with Carlisle also seeing a huge increase of 48.1%.
Five other cities saw significant uplifts – Leeds (28.1%), Bristol (24.1%), London (22.3%), Southampton (22.2%) and York (21.9%).