by Calculated Risk on 12/12/2025 04:21:00 PM
A few brief excerpts from a Goldman Sachs research note on shelter inflation:
[R]apid multifamily supply growth amid a cooler labor market, slower immigration, and an already rising vacancy rate is likely to keep new lease rent growth subdued in 2026. … We forecast that PCE housing inflation will slow to 0.22% month-over-month and 3.4% year-over-year in December 2025 and 0.16% month-over-month and 2.1% year-over-year in December 2026.
Under our forecast, the contribution from shelter inflation to year-over-year core PCE inflation shrinks from 0.7pp in the latest report to 0.6pp by December 2025 and 0.4pp by December 2026, versus 0.6pp on average in 2018-2019.
Here is a graph of the year-over-year change in shelter from the CPI report and housing from the PCE report this morning, both through September 2025.
Housing (PCE) was up 3.7% YoY in Septemberdown from 3.9% in August and down from the cycle peak of 8.3% in April 2023.
Economists at Goldman Sachs expect this will decline to 2.1% YoY by December 2026. This is a key reason why the FOMC expects inflation to decline in 2026 (along with less impact on inflation from tariffs).
