According to economists at the San Francisco Fed, shelter inflation is projected to decline over the next few months, returning to pre-pandemic trends by 2025.
The model developed by Jorda and Yalcin indicates that while shelter inflation is on a downward trajectory, it declines more slowly compared to other goods due to construction costs.
The research emphasizes that although rental prices are expected to decrease, the increase in construction costs from higher interest rates may continue to impact housing supply negatively.
San Francisco Fed's study highlights that housing costs are a key driver of inflation in the U.S., influencing Fed officials to adjust interest rate policies.
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