House prices rose by 0.8% between December and January, the Halifax House Price Index shows.
But there remained a 2.4% drop year on year and a 0.7% fall for the quarter, making the average price £164,173.
Martin Ellis, housing economist at Halifax, says the quarterly drop shows the continuing slight downward trend.
He says: “We expect limited movement in house prices overall this year. There are, however, likely to be some monthly fluctuations with the risks on the downside. The prospects for the market in 2011 are closely aligned with the performance of the wider economy. Consumer confidence has fallen recently, partly as a result of nervousness about the economic outlook.
“On a positive note, there have been further signs that the recent downward trend in prices is causing homeowners to be more reluctant to put their properties on the market.
“This development should help to relieve downward pressures on prices as long as it is sustained. We also expect interest rates to remain very low for some time, supporting a favourable affordability position for many existing mortgage borrowers and those entering the market.”
Mark Blackwell, managing director of xit2, says the Halifax index is working with a small sample taken from a tiny market.
He says: “There were less than 40,000 transactions in January and that means none of the usual indexes are as reliable as they should be.
“They’re just too volatile to draw meaningful conclusions from monthly statistics. Having said that, it’s clear the housing market is bumbling along at the moment – and it looks as if prices aren’t going to rise any time soon.”
Paul Diggle, property economist at Capital Economics, says the Halifax numbers have been volatile for a number of months.
He says: “The bounce in house prices in January is unlikely to signal the start of a rising trend. With the economic fundamentals of the housing market still very weak, the most likely scenario is for house prices to end the year significantly below where they started.”