Housing’s inflation contribution nears pre-pandemic levels, and almost nobody noticed

One of the most stubborn drivers of post-pandemic inflation has been quietly retreating. Nick Timiraos, the Wall Street Journal’s chief economics correspondent, flagged that housing’s contribution to inflation has now fallen below pre-pandemic levels, with core PCE running at or below 2%. The numbers behind the quiet shift By March 2025, housing’s contribution to core PCE stood just 0.3 percentage points above the average from the 2011-to-2019 pre-pandemic period. That was down from a 0.5 percentage point overshoot a year earlier. As recently as early 2024, shelter inflation was clocking in at over 5% year-over-year. The driving force behind this disinflation has been a gradual pass-through from lower new-lease rents. When rents on newly signed leases fall, it takes time for that to filter into the official data, because inflation metrics capture the entire stock of rental agreements, not just fresh ones. Why core PCE at 2% deserves more airtime Timiraos has consistently noted that before the pandemic, core PCE was already running below the Fed’s 2% target. This means that for inflation to settle back at 2%, not every single component needs to return to its exact pre-pandemic avera...