The warning on Friday comes despite property prices increasing at double-digit rates in 2022.
The average house price was at a record £286,079 ($357,073) in April — an annual increase of 10.8%, according to the latest figures from Halifax.
"Higher property prices and interest rates, together with steep increases in the cost of living, mean housing has become less affordable and we expect housing market activity to slow and the rate of house price growth to moderate in the coming quarters," Nationwide said.
"There is a risk of a downward movement in house prices, given the pressure on household budgets."
It came as the UK's second-biggest provider of home loans posted its strongest financial results on the back of Britain's booming property market.
The customer-owned lender nearly doubled its pre-tax profit to £1.6bn, on underlying income of £3.9bn, up 18% for the year ended 4 April. This was up from £823m the previous year.
The mortgage-lender's finances were boosted by a strong economic recovery from coronavirus lockdowns, including a £6.9bn rise in gross mortgage lending.
It said it had performed well across its three core areas in capitalising on a "buoyant and competitive" mortgage market, whilst also attracting more current account holders and boosting deposits.
Overall mortgage lending to homebuyers and landlords grew "substantially" during the pandemic as the company had been able to capture a larger share of the mortgage market, Nationwide said.
However, despite the surge in profits, chief executive Joe Garner warned price rises were starting to hurt customers, with inflation hitting levels not seen in Britain since the 1980s due to soaring energy prices and supply chain disruptions worldwide.
"The emergence of higher inflation, which has been exacerbated by the war in Ukraine, is likely to exert a significant drag on the economy in the near term," the outgoing CEO said said.
It was Garner's last set of results at the helm before handing over to former TSB CEO Debbie Crosbie on 2 June.
Nationwide's listed bank rivals including NatWest (NWG.L) last month posted higher profits but warned of a potential slowdown in growth from the rising cost of living as fuel and food costs surge.
In April, Lloyds (LLOY.L) warned that the cost of living crisis could result in higher defaults on its loans as it posted a 14% drop in quarterly profits to £1.6bn, down from £1.9bn a year earlier.
Barclays (BARC.L) also flagged the rise in cost of living standard after profits declined 7% to £2.2bn in the first quarter of this year.