New shelter inflation numbers from the Bureau of Labor Statistics are scheduled to be released on Tuesday, January 13, 2025 at 8:30 ET. 

October and November CPI shelter readings were distorted by a data collection gap. Rent levels carried forward from April mechanically produced zero shelter inflation in October and reduced the measured two-month change by roughly half. To avoid embedding this mechanical noise in our outlook, our December forecast uses a three-month horizon anchored to September as the last representative month-on-month observation. This approach abstracts from temporary measurement artifacts while preserving the clear underlying trend in housing inflation.

Key Takeaway

CPI housing inflation measures are expected to continue moderating into 2026, driven by the deceleration in market rents. Expectations for a stagnant job market also contribute to a flatter outlook for housing costs.

The Forecast

Owners’ Equivalent Rent (OER)

Monthly outlook: Owner’s Equivalent Rent, which measures what homeowners would theoretically pay to rent their own homes, is projected to have increased 0.27% in December 2025 (95% confidence interval: 0.13% – 0.42%) in line with the gradual slowing over the year. This would bring the annual increase in the index to 3.25%, a moderation from 3.36% in November. We expect the monthly growth to continue trending downward to a 0.20% pace over the next year.

Annual outlook: We forecast OER to rise 2.9% over 2026, about a half-point slowdown from the 2025 increase. The index is expected to continue decelerating into 2027, increasing just 1.9% over the year.

Rent of Primary Residence

Monthly outlook: Rent of Primary Residence, which tracks rent payments, is projected to have increased 0.21% in December 2025 (95% confidence interval: 0.02% – 0.39%), consistent with the downward trend over the year. This would bring the annual increase in the index to 2.93%, a moderation from % in November. We expect the monthly growth to continue trending downward to a 0.13% pace over the next year.

Annual outlook: We forecast the Rent of Primary Residence index rise 2.0% over 2026, about a full point slowdown from the 2025 increase. The index is expected to continue decelerating into 2027, increasing just 1.0% over the year.

Market Rents

Single-family: Zillow’s expectations for on-market rent growth for single-family units remained relatively unchanged: single-family rents are expected to rise 1.6% in 2026, slowing to 1.1% growth in 2027. 

Multifamily: Zillow’s expectations for on-market rent growth for apartments was revised upward: multifamily rents are expected to rise 0.2% in 2026, followed by a 0.8% decline in 2027. 

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.