Shelter costs comprise a third of the overall Consumer Price Index (CPI). The CPI component rose 0.4% month over month and 5.4% year over year in May.

Yahoo Finance Reporter Dani Romero breaks down the latest shelter data and its outlook as inflation cools.

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This post was written by Melanie Riehl

Video Transcript

Well, we've been discussing it.

Let's turn back to one of the most important sectors in the inflation print shelter.

The cost to own or rent a home has stayed pretty high all year, even as prices in other sectors have gone down here with the latest.

We've got our very own Danny Romero, who's been reading into this.

Danny, what do you make of it?

Brad?

Shelter remains a sticky component in the inflation picture, but economists tell me that the disinflation process in shelter is underway.

Shelter posted 8.4% monthly gain, the fourth consecutive month of gains, and on a yearly basis, shelter came in at 5.4% the slowest annual increase since April of 2022.

Remember, the shelter index makes up a third of the overall CP I basket, and there are two components that economists pay close attention to and that hold the biggest weight in the shelter figure.

That's owner equivalent Rent O.

That's the hypothetical rent you would earn if you rented out your property and rent, which lags real time data because the government collects rent data every six months, causing a lag in that index.

So O came in at 0.4% gain last month, while rents came in at a 0.3% rise LA last month.

Now, the reason why renters have been seeing slower rent increases has been due to the new apartment supply that has been added to the market.

And so some renters are reaping those benefits in some markets, as some landlords are really offering some form of an incentive to attract renters into the market.

Now I want to say that typically rents do go up in the spring and summer months because people take advantage of the warmer weather to move.

Now, some industry experts say it's unlikely that we will see high rent price increases this year or next year due to the increase of supply.

Brad.

All right, Danny, thanks so much.

Appreciate you breaking that down further here.

Just a little bit more on the O, and shelter