Inflation Falls Below 3% Amid Persistent Housing Costs

Inflation dropped below a 3% annualized growth rate for the first time since March 2021 even though housing costs continue to climb. Nonetheless, the headline reading is another dovish signal for future monetary policy, following signs of weakness in the most recent job report.
Despite a slowdown in the year-over-year increase, shelter costs continue to exert significant upward pressure on inflation, contributing nearly 90% of the monthly increase in overall inflation and more than 70% of the total 12-month increase in core inflation. As consistent disinflation and a cooling labor market bring the economy into better balance, the Federal Reserve is likely to further solidify behind the case for rate cuts, which could help ease some pressure on the housing market.
The Fed’s ability to address rising housing costs is limited because increases are driven by a lack of affordable supply and increasing development costs. Additional housing supply is the primary solution to tame housing inflation. However, the Fed’s tools for promoting housing supply are constrained. In fact, further tightening of monetary policy would hurt housing supply because it would increase the cost of AD&C financing.
Nonetheless, the NAHB forecast expects to see shelter costs decline further in the coming months. NAHB Senior Economist Fan-Yu Kuo delves into the data in this Eye on Housing post.
Latest from NAHBNow
Oct 09, 2025
3 Ways to Utilize Construction Site Surroundings to Optimize DesignHome design isn’t just about color swatches and backsplashes. Architecturally, building professionals can look toward climate responsive design and ambient design, which both involve using the elements around a home to the client’s advantage.
Oct 09, 2025
Remodeling Market Sentiment Improves in Third QuarterNAHB released its NAHB/Westlake Royal Remodeling Market Index (RMI) for the third quarter, posting a reading of 60, up one point compared to the previous quarter. With the reading of 60, the RMI remains solidly in positive territory above 50, but lower than it had been at any time from 2021 through 2024.
Latest Economic News
Oct 07, 2025
Minority-Owned Residential Building Firms Continue to RiseThe share of minority-owned new residential builders and remodelers has more than doubled since the Great Recession, with noticeable gains from 2017 to 2022. Nevertheless, when compared to the overall U.S. population, minority-owned firms continue to be underrepresented within both housing sectors.
Oct 06, 2025
Shorter Apartment Construction Time in 2024The average time needed to complete construction of a multifamily building after obtaining authorization edged down in 2024, according to the 2024 Survey of Construction (SOC) from the Census Bureau. On average, it took 19.6 months from permit to completion, about 0.3 months shorter than in 2023.
Oct 03, 2025
Supply-Side Cost Pressures Drove Housing as Inflation Leader in 2024Though the rate of inflation peaked in June 2022, consumer prices continued to increase throughout 2023 and 2024 as inflation drove further price growth, according to 2024 CPI review from the Bureau of Labor Statistics.