The


Federal
Reserve’s
policy
of
higher
interest
rates
has
significantly
reduced

inflation,
but
one
sector
of
the
economy
—
shelter
costs
—
continues
to
drive
the
Consumer
Price
Index
(CPI)
higher.

In
October,
housing
accounted
for
more
than
half
of
the
CPI
increase
compared
to

September,
rising
0.4%
on
a
seasonally
adjusted
basis.
The
rise
is
in
line
with
shelter
cost
numbers
going
back
to
April
as
the
monthly
inflation
rate
since
then
has
ranged
from
0.1%
to
0.5%.

On
an
unadjusted
basis,
shelter
costs
rose
4.9%
year
over
year.
According
to
Danielle
Hale,
chief
economist
at

Realtor.com,
that
is
higher
than
pre-pandemic
baselines
that
averaged
3.3%.

“Although
shelter
inflation
has
moderated
considerably,
an
uptick
in
shelter
prices
month-to-month
is
a
step
in
the
wrong
direction,”
Hale
said
in
a
statement.

On
a
year-over-year
basis,
overall
inflation
ticked
up
2.6%
while
core
inflation
—
minus
food
and
energy
costs
—
rose
3.3%.

Historically
high
inflation
prompted
the
Federal
Reserve
to
raise
interest
rates
in
2022,
which
subsequently
pushed

mortgage
rates
into
the
high-7%
range.
But
moderating
inflation
allowed
for
a

50
basis-point
(bps)
rate
cut
by
the
Fed
in
September
and
a

25-bps
reduction
a
week
ago.

While
some

economists
expect
additional
interest
rate
cuts
in
the
short
and
medium
term,

Donald
Trump’s
return
to
the

White
House
could
reduce
the
likelihood
of
these
cuts.
Trump
is
expected
to
expand
government
spending,
boost
consumption
and
levy

heavy
tariffs
on
foreign
goods,
which
might
lead
to
higher
inflation
and
force
the
Fed
to
raise
interest
rates
again.

The
good
news
for
consumers
is
that
energy
costs
fell
4.9%
year
over
year,
driven
by
a
20.8%
decline
for
fuel
oil
and
a
12.2%
decline
for
gasoline.
This
helped
to
reduce
the
impact
of
rising
shelter
costs. 

But
food
prices
rose
2.6%,
something
that
contributed
to
a
negative
perception
of
the
economy
and
helped
propel
Trump
to
his
win
over
Vice
President

Kamala
Harris.

This
has
put
a
squeeze
on
household
budgets
across
the
country.
Coupled
with
rising
rent
and
home
prices,
many
prospective
homebuyers

have
had
trouble
finding
affordable
housing
options.

“Inflation
could
be
the
wildcard
that
drives
the
2025
housing
market,”

Bright
MLS
chief
economist

Lisa
Sturtevant
said
in
a
statement.
“Overall
home
sales
in
2024
are
likely
to
be
right
around
what
they
were
in
2023
—
a
30-year
low
in
the
number
of
transactions.

“With
uncertainties
around
government
spending,
taxes,
tariffs
and
immigration
policy,
inflation
could
move
higher
and
could
stifle
the
prospects
for
a
housing
market
rebound.”

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