Unraveling current trends: Interpreting fresh data on inflation impacts and the residential real estate sector
Revised Article:
Hey there! It looks like inflation took a tiny dip again, and the Consumer Price Index (CPI) indicates a 2.3% increase over the past year. According to the U.S. Bureau of Labor Statistics, this figure dropped from last month's 2.4% - although it's still higher than the Federal Reserve's desired inflation rate of 2%. This downward trend might have you feeling a bit more hopeful, but take note, it's not quite at the summer of 2022's high point of 9.1%.
In response to these shifting economic winds and faltering jobs data, the Federal Reserve made some adjustments. In 2024, the central bank cut rates at three meetings, including a 0.5% decrease in September and another 0.25% reduction in both November and December. However, we haven't seen any changes in their meetings so far during 2025.
The Role of Housing
When it comes to keeping the overall inflation rate high, the shelter category of the CPI isn't helping. This part of the CPI, covering housing costs, is a persistent factor in inflation's stubborn resilience. In April, shelter increased by 0.3% month-over-month, and a cumulative growth of 4.0% in the last 12 months was recorded. While price growth is easing, it's essential to remember that housing affordability is still causing many Americans a considerable headache.
Mark Hamrick, one of our website's senior economic analysts, acknowledges that "Shelter remains a significant contributor to the rise in consumer prices. If home price growth slows as expected, optimism is justified. But it cannot be overstated that housing affordability continues to be a substantial hardship for many Americans."
According to Lawrence Yun, the chief economist for the National Association of Realtors (NAR), housing costs are the primary driver of inflation, and managing to control these expenses will be critical to reining in overall inflation. He believes the Federal Reserve should integrate four to six additional rate cuts to truly achieve a normal market.
The Current State of Home Prices
On the topic of housing prices, Cotality's latest home-price analysis reveals that prices have risen 2.5% from March 2024 to March 2025, with an expected increase of 4.9% by March 2026. Despite the slowdown in national home price growth, some markets are showing remarkable resilience, even in the face of increased mortgage rates and buyer hesitance. Regions with the most significant inventory shortages, such as the Northeast and Midwest, are helping sustain home prices.
Turning our attention to Fannie Mae's Home Purchase Sentiment Index, we find that it rose by 1.1 points in April to 69.2, up from March's figure, but still 2.7 points lower than a year before. Statistical analysis reveals that 77% of consumers surveyed believe now is not an ideal time to buy a home.
Navigating the Market: Buy or Wait?
With mixed signals appearing throughout the data, is it smarter to buy a home now or wait it out? The same question for home sellers: should you cash in on the ongoing housing shortage or sit tight?
For Homebuyers
Inventory levels remain a concern for potential buyers, with the country having a 4.0-month supply in March, still below the ideal 5 to 6 months required for a balanced market. More encouraging news comes from new construction supply, which reached 8.3 months of single-family homes according to U.S. Census Bureau estimates.
However, it's important to remember that home prices continue to rise, with the median existing home sale price in March at $403,700, up 2.7% YoY and marking the 21st consecutive month of annual growth. If you feel comfortable delaying your home buying plans, it might be wise to wait, so you don't end up overextending yourself. However, if life circumstances demand an immediate move, there's no need to hesitate. Just ensure you're willing to stay in the home long enough to turn a profit when it's time to sell.
For Home Sellers
For those looking to sell their homes, the ongoing housing shortage could present an opportunity to fetch a better price. While this is positive news, keep in mind that once you've sold and are ready to buy a new home, you'll be subject to the same conditions as other buyers, including high mortgage rates.
Location plays a significant role in the buying and selling process. Although the overall median sale price is high, some regions are experiencing slower growth than others. The South has seen significantly lower YoY price increases compared to the West, Midwest, and Northeast, according to NAR data. As always, do your research and consult with a real estate expert to inform your decision.
Homebuying Tips When the Market is Hot
If you're ready to jump into the housing market, consider these strategies to help stretch your budget:
- Invest in a High-Yield Savings Account: Put the money you're saving for a down payment in a high-yield account to take advantage of higher interest rates on savings. Ensure you can easily access the funds when it's time to close.
- Shop Around for a Mortgage Lender: Many non-bank and online lenders offer attractive rates and don't charge origination fees. This can help you save more money in the long run.
- Lock in Your Mortgage Rate: When you find a lender and apply for a loan, ask about locking in your rate. This will help protect you from rising rates that could unexpectedly increase your monthly payments before you close.
- With housing costs being a significant factor in inflation, individuals looking to manage their personal-finance and stay afloat in the current economic climate might consider investing in high-yield savings accounts for their savings towards a down payment on a savings account, as it offers higher interest rates on savings and is easily accessible.
- As the housing-market remains active, homebuyers navigating the market should be aware of the impact of mortgage rates on home prices and consider shopping around for a mortgage lender, as non-bank and online lenders often offer attractive rates and don't charge origination fees.
- For home sellers looking to capitalize on the ongoing housing shortage, it's important to be cognizant of the potential challenges that come with selling and buying in the same market, such as high mortgage rates. In such cases, consulting a real estate expert and considering the regional differences in YoY price increases, as some regions experience slower growth compared to others, could help inform a well-informed decision.
