The building society says annual prices dropped by 3.8% and affordability "remains stretched".
UK house prices dropped at their fastest annual pace for 14 years in July, according to Nationwide.
The building society said prices dropped by 3.8%, which is the biggest decline since July 2009.
Nationwide said mortgage interest rates remain high, making affordability a challenge for house-buyers.
Mortgage costs hit the highest level for 15 years in July as lenders grappled with inflation and uncertainty over rates set by the Bank of England.