House buying activity slumped after the terrorist attacks
House prices fell by a slight 0.5% in October, according to the latest figures from the Nationwide.
But, with an average house price of £91,653 this October, that still leaves them 13% higher than a year ago.
Economists have long been predicting that the economic slowdown must start to filter through into the UK's burgeoning housing market.
'Modest easing'
And the latest data indicates that these predictions are beginning to take hold.
"So far there has only been a modest easing in the upward trend in price growth, despite uncertainty since September 11," said Alex Bannister, the company's group economist.
"This is because households generally remain confident about their own financial prospects and the outlook for the housing market."
But, the report says that the steady stream of job and wage cuts will now undermine this confidence.
"Confidence and job prospects are likely to diminish, which will slow the growth in house prices," said Mr Bannister.
London premiums
Last month, the building society reported that prices surged 2.8%, the best in over eight years.
And there has been a 3% rise for the three month period.
The report acknowledges the anecdotal evidence saying the housing market, particularly in London, is entering a slowdown.
This is based on the view that declining confidence, job losses and reducing bonus payments in London, especially those in finance and banking, have led to a fall in prices, says the report.
But Nationwide's own analysis suggests properties at the upper end of the London market are still seeing price growth slow sharply.
And the report concludes that the Nationwide still expects house prices to rise next year, albeit at a more sustainable rate.