Real Estate News
With the affordability strain already impacting real estate, higher inflation could further dampen buyer demand heading into the market’s slower time of year.
Inflation ticked up in September, but the increase probably isn’t enough to prevent the Federal Reserve from cutting short-term interest rates at its meeting next week.
The Consumer Price Index rose 0.3% from August to September and 3% year-over-year, according to the U.S. Bureau of Labor Statistics (BLS). That’s the fastest annual pace since January, with the latest rise largely driven by higher gas prices, which jumped 4.1% in one month.
October rate cut still likely: Concerns about the weakening labor market are expected to outweigh this uptick in prices, which should prompt the Fed to move ahead with a rate cut on Oct. 29, according to Sam Williamson, senior economist at First American.
The Fed made its first rate cut of 2025 last month — and while some analysts suggested it was possible the central bank would make three cuts total before the end of the year, “officials remain divided on how aggressively to ease, making a December cut far from certain and dependent on incoming data,” Williamson said.
December rate cut less certain: With the federal government shutdown dragging on, it’s unknown what kind of data the Fed will have to inform its monetary policy decisions by the time December rolls around. The White House said it doesn’t expect the BLS to produce an inflation report for October, and the September CPI report could be the only economic data released by the agency until the government reopens.
This lack of key data makes measuring labor market and consumer price changes difficult.
What it means for real estate: While short-term interest rate cuts can help with housing affordability, it’s really a double-edged sword: Rates would be falling because of labor market weaknesses, which could lead to higher inflation — particularly if businesses can no longer insulate consumers from tariff-related price increases.
“Inflation still erodes household budgets and savings potential, limiting how quickly demand can rebound,” said Jake Krimmel, senior economist at Realtor.com. “A strong, confident consumer and labor market remains the foundation for a sustained housing recovery.”
And consumers appear to be far from confident. A recent WalletHub survey found that 78% of respondents do not think now is a good time to borrow, and 59% said a quarter-point rate cut would not make a difference in their life. While government-released economic data typically informs Fed decisions, 58% of survey respondents said they don’t trust this data.
The survey also found that 2 in 3 respondents think inflation is a bigger issue than the current job market, while 78% are more worried about losing money to inflation than losing their job to AI.