ANSWER: On the surface it does seem a bit odd that their accounts do not quite mesh. Matthew says Jesus was born in a house in Bethlehem then sometime afterwards is taken to Egypt to escape Herod. After a period of time his family decides to return to Bethlehem, but soon change their mind and travel to Nazareth instead.
According to Luke, however, Mary and Joseph were from Nazareth. They travel to Bethlehem because a census requires them to do so. While they are there Jesus is born in a manger. After his birth they wait for Mary to go through ritual purification, after which they travel to Jerusalem to sacrifice two birds at the temple. After the sacrifice they go home to Nazareth.
As always in the Bible, BOTH accounts are correct because they speak of two different time periods. A quality Harmony of the Gospels should be able to lay out the time sequence of Jesus' entire life based on the four Gospel accounts. Luke's account is the actual event of Christ's birth in the manger.
The time sequence from the birth of Jesus to him being taken to Nazareth is as follows. Joseph is of the lineage of King David, who was born in Bethlehem. The Romans in 5 B.C. require all those in Judea to return to their ancestral home so that they can be counted (it really was for assessing what the people owned for the purposes of TAXES). Because of this decree Mary and Joseph travel to Bethlehem. It is in the city that Jesus is born in a manger (Luke 2:1 - 20).
On the eighth day after his birth Jesus is circumcised according to the law of God (Luke 2:21). Wise men from the East (Magi), after seeing and following a "star" (almost certainly an angel) for two years, seek Herod the Great's assistance in Jerusalem (Matthew 2:1 - 3). The appearance of such dignitaries, in a huge caravan, causes great concern for Herod and the city. Although Herod does not have a clue of where the Messiah was to be born he asks the priests and scribes if they knew (verse 4).
Jesus is brought to Jerusalem's temple, after forty days of purification required by God's law, to be presented before God. His parents make an offering to the temple of two young birds. It is also during their visit to the temple that a priest named Simeon, prophesied about his mission in life and blessed his parents (Luke 2:22 - 35).
Before Mary and Joseph leave the temple a woman named Anna, a widowed prophetess who lived in the house of God, blesses them as well (Luke 2:36 - 38). The family returns to Bethlehem.
The priests and scribes inform Herod that the Christ would be born in Bethlehem (Matthew 2:5 - 6). Herod encourages the Magi to find the Christ child (feigning he wants to worship him as well) then report back to him (verses 7 - 8). After leaving Jerusalem, the Magi notice the "star" that brought them to Judea has appeared again! It leads them directly to a house (NOT a manger!) where they find Mary and Jesus.
Finding them in a home, they offer their gifts of gold, frankincense and myrrh (Matthew 2:9 - 11). The Magi, after being warned in a dream, do not return to Jerusalem to report back to Herod (verse 12). An angel, after the wise men leave Bethlehem, tells Joseph (in a dream) to flee to Egypt because Herod will soon want to kill his child (verses 13 - 15).
It should be noted that Herod the Great was not seeking to worship Jesus as the "King of the Jews" (Matthew 2:2). Herod, in 40 B.C., was given this title by the Roman Senate and saw Christ as a potential rival to his throne. He wanted to know the exact location of where Jesus was born in order to KILL him! He flies into a rage when he discovers the Magi are not coming back to Jerusalem to give him the information he wants (verse 16). He then orders the cold blooded MURDER of all Bethlehem area males two years old and younger (verses 16 - 18).
After Herod dies in early 4 B.C. an angel of the Lord again appears to Joseph, in a dream, and tells him it is safe to return to Israel (Matthew 2:19 - 21). Joseph, after arriving in Judea, discovers Herod Archelaus now reigns in the area.
Fearful of going back and living in Bethlehem, Joseph is instructed in a dream to go to Galilee (Matthew 2:22 - 23, Luke 2:39). The family makes the long trip and goes back to living in Nazareth. In conclusion, both Matthew and Luke are correct in regard to their accounts of Jesus' birth. Their complimentary record not only shows their record was true (and not simply copied) but gives us added details regarding one of the greatest events in the Bible!