Update Following 10/24/2025 CPI Release:

The September CPI release showed housing inflation slowing sharply to the lowest rate of growth since 2021. This drop is directionally in line with our expectations for continued declines but continues a pattern of large jumps in the official data.

Seasonally-adjusted CPI for Owner’s Equivalent Rent (OER) increased 0.13%, far below our expectation of 0.32%. The index is now just 3.8% higher than in September 2024. This is the slowest annual increase since November 2021.

Seasonally-adjusted CPI for Rent of Primary Residence rose by 0.20%, approximately meeting our expectation of 0.24%. The index is now up 3.4% year-over-year.

Housing inflation continued to soften in September and we expect further deceleration ahead. The abrupt decline in OER inflation follows a month of unexplained heat, bouncing noisily around a more gradual underlying trend downward. Over the last three months, OER and Rent of Primary Residence have had average monthly increases of 0.26% and 0.25%, respectively, versus 0.31% and 0.26% in the prior three months. With market rents expected to plateau over the next year, 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 scheduled to be released on Friday, October 24, 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 0.32% in September 2025 (95% confidence interval: 0.20% – 0.43%), lower than August’s 0.38% pace. We expect this measure to decelerate meaningfully over the coming months.

Annual outlook: We now forecast OER to end the year up 3.5% year-over-year, followed by a dramatic downshift to a 2.2% increase in 2026. In August, the OER index was up 4.0% year-over-year.

Rent of Primary Residence

Rent of Primary Residence, which tracks rent payments, is projected to have increased 0.24% in September (95% confidence interval: 0.11% – 0.37%), down from 0.30% in August.

Annual outlook: We now forecast the Rent of Primary Residence index to end the year up 3.0% year-over-year, before decelerating sharply to a 1.7% increase in 2026. In August, 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 2.8% annually, while annual apartment rent increases should slow to 1.1%. Both measures are forecast to slow further in 2026, falling to 2.0% and -0.3% rent growth, respectively.

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.