Housing costs see smallest monthly gain in nearly five years

Americans are finally seeing a break in housing cost inflation.

Data released Friday from the Bureau of Labor Statistics showed that owners’ equivalent rent — the estimated rent a homeowner would pay if they were renting their own property — ticked up 0.1% compared to the previous month in September, marking the smallest monthly increase since January 2021.

“It’s clear that rent is cooling off at last and that will bring relief for many moderate-income Americans who have struggled to find affordable housing in the past few years,” Heather Long, chief economist at Navy Federal Credit Union, told Homes.com.

September's inflation reading was collected before the shutdown four weeks ago, and Friday's report was the first and only official economic data the federal government has released since then. Some employees at the Bureau of Labor Statistics returned to work specifically to produce the report, which is needed to determine the cost-of-living adjustments for Social Security recipients.

According to the Consumer Price Index report, shelter costs —the largest component of the CPI —edged up by 0.2% compared to the previous month. On an annual basis, shelter costs rose by 3.6% in September, reaching the lowest reading since October 2021. Meanwhile, rents of primary residences increased 0.2% for the month.

Economists have long anticipated a slowdown in rent increases, which has been reflected in other real-time data. The discrepancy can be partly explained by the Bureau of Labor Statistics' practice of collecting rent data every six months, which causes a lag.

“The key takeaway is rent continues to moderate, but September’s extremely low rate is unlikely to be the new normal,” Long said. “The good news is rent is on track to grow at very moderate levels in 2026. More inventory continues to come on the market and that should keep rental rates in check for now.”

Meanwhile, homebuyers seeking to furnish their homes will see much higher costs.

Prices for living room, kitchen and dining room furniture jumped nearly 6% over the past year, according to September’s CPI — a clear sign that tariff pressures are still working their way through.

The recent jump in furniture prices can be traced “almost exclusively,” to Trump’s tariffs, Steve Wyett, chief investment strategist at BOK Financial, told Homes.com.

“Along with a few other areas, furniture is a sector where most production has been moved overseas, which requires importing the finished products. Domestically made options are few, meaning furniture retailers are paying tariffs on the majority of their inventory," Wyett added.

Economists and industry analysts explain that the extra costs from tariffs are being shared by everyone involved, including manufacturers, distributors, retailers and shoppers. However, as time passes, companies along the supply chain may find it increasingly difficult to absorb those costs without compromising their profits.

According to Wyett, if tariffs persist, businesses will eventually have to pass more of those costs on to consumers, as they can only accept smaller profits for so long.

Annual inflation accelerated in September to the fastest pace since the start of the year. Consumer prices rose 3.0% from a year earlier, slightly higher than August’s increase of 2.9% and the highest reading since January.

That uptick comes just as the Trump administration rolled out new tariffs on imported furniture, kitchen cabinets, and other household goods, along with lumber, in October. The levies on imported wood products and furniture, ranging from 10% to 50%, are expected to add more upward pressure to household costs.

“Furniture prices are high and likely to keep climbing for the next six to nine months as retailers keep passing more of the tariff costs along to consumers,” Long said.

Still, the Trump administration announced that the pressure will intensify starting Jan. 1, when tariffs increase on upholstered wooden products to 30% and cabinets to 50%.

September’s data keeps the Federal Reserve on course to cut interest rates again at its meeting next week, as policymakers contend with signs of a slowdown in hiring.

Friday’s inflation report was more than one week late due to the government shutdown, which stalled all economic data. The jobs report is still on hold.

The White House said on social media Friday that the federal shutdown would likely delay October’s inflation report, as surveyors who collect the Bureau of Labor Statistics price data cannot work in the field.

Even so, inflation remains a frustration for many Americans, according to the Michigan Consumer Sentiment report released on Friday. The index fell to 53.6 in October from 55.1 in September, with respondents echoing concern about persistently high prices.

Preston Caldwell, chief economist at Morningstar, said after the Consumer Price Index report that “The Fed is likely to interpret the data as follows: tariffs are still pushing inflation up, but not severely."

That means the Fed is likely to keep lowering interest rates, aiming to bring them to a level that won’t slow down or speed up the economy too much, according to Caldwell.

The Federal Reserve's next interest rate policy meeting is scheduled for Oct. 28 to 29.