February inflation data shows housing costs rose at the slowest pace in over 3 years
The latest Consumer Price Index (CPI) showed that housing cost increases eased in February to the slowest pace in over three years.
Data from the Bureau of Labor Statistics showed that shelter costs rose 4.2% from a year earlier in February, slower than the 4.4% increase seen in January and the smallest 12-month increase since December 2021.
On a monthly basis, housing costs ticked up 0.3% compared to February and down from January's 0.4% monthly increase.
Still, the housing component accounted for nearly 50% of February's overall monthly CPI increase.
"We're seeing some welcome easing in price pressures, as well as indicators that point to further disinflation in market rents for at least the next six months," Sarah Wolfe, senior economist and strategist at Morgan Stanley Wealth Management, told Yahoo Finance in an email.
Economists have long expected a slowdown in rent increases, a trend that has been reflected in other data. February's inflation print could be the latest sign that the broader cooldown in rents might finally appear in CPI. The BLS collects rent data every six months, which has caused a lag in the reporting.
The government said the rent index rose 0.3% in February, matching January's pace of 0.3%.
Meanwhile, prices for owners' equivalent rent increased 0.3% for the month, unchanged from January's 0.3% gain. Owners' equivalent rent is the estimated amount a homeowner would pay if they rented their property.
Read more: 2025 housing market — is this a good time to buy a house?
"Only a few properties now are seeing large catch-up increases in rent when a long-standing tenant departs. The surge in new rents in 2022 has now almost fully filtered through to the entire rented housing stock," Pantheon Macroeconomics chief US economist Samuel Tombs wrote in a note after the release.
The gauge for lodging away from home price increases cooled in February, rising by 0.2% in February, down from the 1.4% rise in January. This, according to experts, helped bring down overall shelter price pressures.
Some economists believe rental price growth will likely move lower this year, pressured by "stricter immigration enforcement" and the trade war.
"Policy can cut both ways — weaker immigration means less housing demand, but also less labor supply for construction, while tariffs could impact building costs and serve as a headwind to new construction," Wolfe added.
Overall, consumer prices rose 0.2% over the previous month, down from January's monthly increase of 0.5% and lower than economists' expectations of a 0.3% monthly rise.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.
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