The Consumer Price Index (CPI) for March showed that housing inflation is cooling. Yahoo Finance Senior Reporter Dani Romero joins Wealth to discuss the details, highlighting that the 4% year-over-year increase in housing costs is the slowest 12-month increase since November 2021.
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Shelter inflation just rose two-tenths of a percent month over month, 4% year over year. According to the latest Consumer Price Index report, it's smallest, get this, 12-month increase since 2021. Here with more is Yahoo! Finance's own Danny Romero. Danny, we've been, I mean, we've been waiting for this moment because it's been the largest contributor to the all items index for what seems like years now at this point. So how how can we expect housing inflation to continue moderating at this point or or could tariffs be an issue in future prints?
That is the big question here. There are so many unknowns with Trump's policies at play. And so taking a look at the latest inflation data, housing inflation cooled in March. And this was driven by the decline in hotel prices. This is the second consecutive month where we have seen housing costs cool. And so the government data showed us that shelter costs rose 4% on an annual basis. And like you said, that is the slowest pace since November of 2021. Now on a monthly basis, housing costs ticked up by 0.2% last month. Now, remember, there are two components that economists pay very, very close attention to and that hold the biggest weight in the shelter figure. And that's owner's equivalent rent, OER. That's the hypothetical rent that you would earn if you were a homeowner renting out your property. And so OER came in at a 0.4% gain last month, breaking the four-month streak of a 0.3% monthly gains and rent, which lags real-time data because the government collects this rent data twice a year, which is causes the lag in the index. So rents rose 0.3% in March. And so some economists say that shelter dynamics really vary by region and by state. And we are seeing some elevated prices in the major cities.
So if the US does experience a longer-term downturn or even a recession that we've heard some economists talking about as well, how could that affect the housing market?
A recession would mean less people are unemployed, which means that would be a pullback in buyer appetite, less buyer demand out there would put pressure on home prices. And so some economists say that some regions might see price pressures than others. Like in the South, we could see a bigger drop in home prices since there's a lot of inventory out there. In the Northeast, it's unlikely because there's an under supply out here. So on the new home front, new home market front, home builders could pull back because tariffs will increase their material costs. We've already seen that. And lastly, a recession would lower mortgage rates, but for painful reasons, Brad.
Yeah, and the employment situation certainly is one of those as in past recessions. We've typically seen employment pull back, and therefore unemployment rate rises. And that's a larger consideration for the housing market as well and some of those prices you were laying out. Danny, thanks so much for taking the time.