Zillow: CPI Shelter Forecast, August 2025
Update Following 09/11/2025 CPI Release:
The August CPI release showed a reacceleration of housing inflation measures, with housing costs rising faster than expected in our model.
Seasonally-adjusted CPI for Owner’s Equivalent Rent (OER) increased 0.38%, much more than our expectation of 0.23%.
Seasonally-adjusted CPI for Rent of Primary Residence rose by 0.30%, above our expectation of 0.26%.
While rent measures ticked up in August, we still expect further deceleration ahead as market rents have shown no signs of renewed heat. Even with this higher print the overall trend remains downward for both OER and Rent of Primary Residence, with average monthly increases of 0.32% and 0.26% over the last three months, respectively, versus 0.34 and 0.30 in the prior three months. Housing inflation is expected to continue easing in both the near and longer term, serving as a counterweight to upward price pressures in other sectors.
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New shelter inflation numbers from the Bureau of Labor Statistics are to be released on Thursday, September 11, 2025 at 8:30 ET.
Key Takeaway
CPI housing inflation measures should moderate significantly through late 2025 and 2026, driven by a sharp deceleration in market rents over the last few months.
The Forecast
Owners’ Equivalent Rent (OER)
Owner’s Equivalent Rent, which measures what homeowners would theoretically pay to rent their own homes, is projected to have increased 0.23% in August 2025 (95% confidence interval: 0.12% – 0.34%), lower than July’s 0.28% pace. However, we expect this measure to decelerate meaningfully over the coming months.
Annual outlook: We now forecast OER to end the year up 3.3% year-over-year, followed by a dramatic downshift to a 1.6% increase in 2026. In July, the OER index was up 4.1% year-over-year.
Rent of Primary Residence
Rent of Primary Residence, which tracks rent payments, is projected to have increased 0.26% in August (95% confidence interval: 0.13% – 0.30%), unchanged from 0.26% in July.
Annual outlook: We now forecast the Rent of Primary Residence index to end the year up 2.9% year-over-year, before decelerating sharply to a 1.2% increase in 2026. In July, the Rent of Primary Residence index was up 3.5% year-over-year.
Zillow’s expectations for on-market rent growth in 2025 remained relatively unchanged: single-family rent expected to decelerate to 2.6% annually, while annual apartment rent increases should slow to 0.9%.
Importantly, the shelter components of the CPI continue to increase at a faster pace than these on-market rent trends, reflecting not only new lease pricing but also rent changes for renewing and longer-term tenants.
Methodology
These forecasts are based on predictions from a model that makes explicit the relationship between on market rents (measured by the Zillow’s Observed Rent Index) and the shelter components of the Consumer Price Index (CPI).
The model incorporates:
- Expected on-market rent growth (Zillow’s Observed Rent Forecast, ZORF)
- Assumptions about how landlords adjust rents at lease renewal
- Renter mobility rates, which determine what share of tenants face a market rent increase.
